Some simplified points of basic defamation law as background:
A critical element of defamation law is that the defendant said something false.
You therefore can't win a defamation case if it's based on a statement that can't be proven false: "You are annoying." "You are ugly." "You are a bad lawyer."
If a statement can't be proven false, it is considered opinion.
Statments of opinion are virtually always protected by the First Amendment.
Powell's brief relies on this framework to argue that because her statements were statements of opinion, no defamation could have occurred. It's like defending against a murder charge by saying that no one died. Although it isn't generally referred to as the "reasonable person standard," reasonableness comes into this question because part of the calculus in assessing whether a statement is fact or opinion is to ask whether a reasonable person would understand the statement to be making an assertion of fact. Milkovich v. Lorain Journal Co., 497 U.S. 1 (1990).
By leaning into that language, Powell is not saying that reasonable people would not have any reaction or would not have any specific reaction to her statements; instead, she is saying that reasonable people would not have understood her statements to be assertions of fact. Her argument seems to turn on the fact that she was speaking as an attorney representing a political candidate in a lawsuit, and that reasonable people understand statements made in that context to be "inherently prone to exaggeration and hyperbole” and "view them only as claims that await testing by the courts through the adversary process."
For what it's worth, that seems to me like a pretty weak argument. While people expect a certain amount of puffery from their candidates, they also expect that lawyers representing the President of the United States aren't going into court with frivolous allegations.
More importantly, though, I think she's running the analysis incorrectly. Rather than asking whether a reasonable person would understand her statements to assertions of fact, she's asking whether a reasonable person would think that she was prone to exaggerate in the setting in which she made those statements. As I understand it, a speaker cannot cloak statements of fact from liability by merely refraining from uttering them until she finds herself in a context where people expect some amount of loose speech. Even if you're a partisan hack with no credibility appearing on a TV show hosted by another partisan hack with no credibility, you generally can't accuse your opponent of being a murderer or child molester or something like that. Those are still assertions of fact, even if they're bookended with statements that "Donald Trump is the greatest president this country will ever have."
The brief does not rely at all on Hustler or the First Amendment protections for parody that were discussed in the previous answer. These tests are closely related, however, as both defenses claim that the speech was not "false" in the relevant sense.