Cal Coast News writers lose libel verdict, ordered to pay $1.1 million in damages

'This is not a newspaper; this is an online rag sheet': Reactions to Cal Coast News losing libel lawsuit

Plaintiff Charles Tenborg and his lawyer, James Wagstaffe, discuss their defamation case against Cal Coast News on Thursday, March 16, 2017. A jury found Cal Coast News libels a Tenborg, a former Arroyo Grande hazardous waste contractor, when they
Up Next
Plaintiff Charles Tenborg and his lawyer, James Wagstaffe, discuss their defamation case against Cal Coast News on Thursday, March 16, 2017. A jury found Cal Coast News libels a Tenborg, a former Arroyo Grande hazardous waste contractor, when they

A jury on Thursday found two Cal Coast News writers libeled a hazardous waste contractor when they accused him of illegal activity in a 2012 article and are now responsible for $1.1 million in damages.

The defamation case against Karen Velie and Daniel Blackburn, current and former co-owner of Cal Coast News, respectively, began last week and concluded with closing arguments Wednesday.

The case stems from a lawsuit filed by Charles Tenborg, past president of Arroyo Grande-based waste management company Eco Solutions, which contracted with public agencies such as the San Luis Obispo County Integrated Waste Management Authority.

After the verdict, Tenborg said he was “extremely relieved.”

“I’m ready to continue on with my life,” Tenborg said. “I plan on living here for the rest of my life, and these accusations were false — there were no sources and there was no evidence.”

Tenborg’s attorney, San Francisco-based James Wagstaffe, said the verdict restores faith in local journalism.

“This is not a newspaper, this is an online rag sheet that sensationalizes,” Wagstaffe said. “And a local community can be terrorized by that activity. When there are false statements — I believe in the First Amendment, I believe in great investigative journalism. This was not that.”

Velie and Blackburn could not be reached for comment, but one of their four defense attorneys, David Vogel, said the verdict was disappointing. He said two of the sources that the writers used for the article have since died and another lived “outside the jurisdiction” and was unable to testify.

“I think the jury based its verdict in large part on the fact that we couldn’t produce those witnesses,” Vogel said.

He said he did not know what the jury award means for the future of the website, or whether Velie and Blackburn planned to now remove the libelous article. It remained online as of Thursday evening.

“I don’t know what their intent is at this point,” Vogel said.

Cal Coast News’ editor Bill Loving, who testified in the trial and also works as a journalism professor at Cal Poly, wrote a note to his students Wednesday saying that he was resigning from the university effective Aug. 31.

How damages break down

Of the total verdict, the jury awarded $300,000 in actual damages for pain and suffering and emotional distress, $300,000 in presumed damages for loss of future revenue and $500,000 in punitive damages.

Velie is liable for the entire amount, but Blackburn is responsible for $600,000 because the jury did not find him liable for the punitive damages, Wagstaffe said.

Tenborg had been seeking more than $1 million in damages for loss of future revenue and at least $500,000 in punitive damages.

The jury voted unanimously on the verdict, 11-1 on the actual damages and 10-2 on the punitive damages.

The article “Hazardous waste chief skirts law” alleges that Tenborg illegally received a no-bid contract with the Integrated Waste Management Authority, had been fired from his previous position with the county and was “encouraging (clients) to break state law.” It features photos of Tenborg and IWMA manager William Worrell, as well as a stock image of a yellow barrel labeled “radioactive.”

Throughout the trial, Wagstaffe alleged the writers didn’t research easily verifiable facts or obtain appropriate records, seek sources with direct knowledge, or allow Tenborg a chance to defend himself against their allegations.

Plaintiff’s case

Lawyers for Tenborg presented evidence to the jury that Tenborg’s contract with IWMA was under the legal limit requiring a public bid, showed jurors Tenborg’s resignation letter as proof that he was not fired, and argued that their client complied with all applicable laws while transporting waste. The article does not offer contrary evidence, they said.

Velie and Blackburn stood by the article and testified that it was to be the first in a series that never came to fruition, and said the allegations would have been proven in later articles.

During his testimony, Tenborg said that Eco Solutions transported low-grade hazardous waste for small businesses to waste facilities at local landfills as part of an IWMA program. He said he was contacted by colleagues from across the state about the allegations after the article appeared in a waste industry newsletter. He sold the business after his reputation suffered, he said.

“I had a good job,” Tenborg testified. “That’s what I wanted to do, to help people comply (with waste disposal regulations).”

He said Velie contacted him no more than three times before the article’s publication and he referred questions he couldn’t answer to the appropriate people. Velie never asked about licensing, his past employment or illegal transportation of waste, Tenborg said.

When he saw the article online, Tenborg said he felt “absolutely ill.” After Velie didn’t return his phone calls, he and Worrell sent a letter demanding a retraction.

“I never heard anything from them,” Tenborg said.

On the stand, Velie said she investigated Tenborg for about eight months while Blackburn investigated tips about Worrell’s past employment. Velie testified that she relied on “a number of attorneys who donate their time to help” with the website, as well as former San Luis Obispo city and IWMA employees.

Although she said “there were dozens” of sources used for information for the article, Velie often testified she could not remember who gave her what information and could not provide her notes after they were lost because of a broken computer.

Velie also testified that when she received the retraction letter, Loving, the website’s editor, told her to leave the article as is because of a pending lawsuit.

The letter, later shown in court, did not threaten a lawsuit, and Loving later testified that he never instructed Velie to leave the article online.

Blackburn testified that the site follows “the strictest standards” and covers “stories that the other media ignore.” He said that he gave up co-ownership of the site in 2010 but continues to report as its senior correspondent.

Professor testifies

On Monday, Tenborg’s attorneys called to the stand Venise Wagner, a former reporter and current journalism professor at San Francisco State University, where Wagstaffe is listed as a lecturer.

After reviewing the article and Velie and Blackburn’s depositions about how they gathered their information, Wagner testified that the pair relied on “hearsay” from a group of sources who were granted anonymity and called the published product “all innuendo.”

“I kept reading and I thought, ‘Where’s the proof?’ And I never saw any proof,” Wagner said. “There were untruths, and it didn’t seem that reasonable care was taken to get the truth.”

Wagner testified that professional news organizations follow the Society of Professional Journalists’ Code of Ethics, which calls for seeking the truth and reporting it, minimizing harm, acting independently, and being transparent and accountable. She said that once Velie and Blackburn realized the article was not accurate, it was their duty to remove the article from the website and correct the record.

Velie’s inability to produce notes from the story made her “very suspicious,” Wagner said. “I don’t know how you can investigate a story for 10 months and have no notes,” she said.

Closing arguments

During closing arguments Wednesday, Cal Coast News’ defense attorney Vogel called the damages Tenborg was seeking “outrageous” and that his attorneys never proved he lost prospective clients because of the article.

In his closing, Wagstaffe said Velie and Blackburn “targeted” his client and noted that they did not call any of about a dozen sources used for the story to testify in defense of the writers.

“That tells you everything you need to know about this case,” Wagstaffe said. “They knew what they were doing.”

In supporting the damages, Wagstaffe said Tenborg was forced to sell his business for $1.3 million, about $1.1 million less than it was valued.

Matt Fountain: 805-781-7909, @MattFountain1

Related stories from San Luis Obispo Tribune