# FILED

May 22, 1997 Cecil Crowson, Jr . App ellate C ou rt Clerk IN THE COURT OF APPEALS OF TENNESSEE WESTERN SECTION AT JACKSON

______________________________________________ JOSEPH F. MY

ERS, and CARL D. KLI

MEK d/b/a MK ASSOCIATES, Plaintiff s-Appell ants, Vs. C.A. No. 02A01-9605-CV-00124 Shelby law No. 45135 T.D. PICKERING FIRM, INCORPORATED, Defendant-Appellee.

______________________ _____________________________________________________ _ FROM THE SHE

LBY COUNTY CIRCUIT COURT THE HONORABLE ROBERT A. LANIER, JUDGE

Richard M . Carter

and Scott T . Beall Martin, T ate, Mor

row & Mar ston, P.C., o f Memphis For Plaintif

fs-Appe llants Jerry O. Potter and William B. Walk, Jr. The Har dison Law

Firm, P.C. For Defendant-Appellee

AFFIRMED AS MOD

IFIED AND REM

ANDED Opinion filed:

W. FRANK CRAWFORD,

PRESIDING J

UDGE, W.S.

CONCUR:

DAVID R.FARMER,

JUDGE HEWITT P. TOM LIN, JR., SE NIOR JUDGE This appeal involves a suit for libel and for procurement of bre ach of contract. PLEADINGS The first amended complaint filed in the circuit court by the plaintiffs, Joseph F. Myers1 MK originally entered into the contract with Luther Terrac e, Inc. and Lutheran

Social Services of Tennessee, Inc., but subsequent to the contra ct date, LSSM assumed all of the owner’s rights and obligations under the contract.

2 FB&D is a De

laware limited pa

rtnersh ip with its pr

incipal p lace of

business i n Memphis, Tennessee. Its general partner is Fogelman Properties, I nc. 2 and Carl D. Klimek d/b/a M K Associates (MK), against the defendant, Pickering Firm , Incorporated

(Pickering), alleges, in substance, that in Jul y 1985 MK ha d a contr act with Lut heran Social Ser

vices of Memphis, I

nc. (LSSM) 1 to perfo

rm arch itectura l service s i n connection withthe design and construction of a five-story residential home for the elderly that

was part of

Lutheran Village and was referred to in the complaint as Project A. Subsequently, in July 1988, MK entered into another contract with LSSM to p erform a

rchitec tural ser

vices in

conn ection with the design and construction of twenty-five townhouse units, which were als o to be a part of Lutheran Village and wer e described in the complaint as Pr oject B. In May of 1989, LSSM contracted with Fogelman/Byrnes and Doggett (FB&D) 2 as c ontracto rs for the construction of both projects. During the course of construction, MK noted defects in the work performed

by the co n tractor

that wer e not timel

y cured. As a resu

lt of FB&D’s

failure to complete the work, MK refused to certify draw requests submitted

by FB&D and recommended that LSSM have the work corrected by another contractor. The complaint alleges that Project A never r eached a stage o f comp l etion at w hich it could be ce

rtified a s substant

ially comp lete

as describ ed in

the contract and that Project B never reached the level of completion for a fina l inspection. MK avers in its compla

int that, in Februar y 1991, FB&D

filed suit in the Chancery Court of Shelby County against LSSM, MK, and Myers and Klimek, in dividually , as a result of MK’s refusal to certify draw r equests. MK’s complaint further avers that after the FB&D suit was filed, and on or about March 22, 1991, LSSM entered into a contract with Pickering for Pickering to perfo

rm indepe ndent on- site docu

mentary review o f both pro

jects and to report it s findings as to the quality and completeness of the construction documents and the status of

the construction projects. MK’s complaint also alleges that Pickering issued a report to LSSM dated April15, 1991 that contained many fal se and defamatory statements about MK’s work as the architect on the two projects, and notwithstanding noti fication that the report was false and

errone ous, Pickering failed and refused to correct the statements therein. The complaint further3

alleges that in late April or early Ma y 1991, Pickering c ontract ed with LSSM

for Picke ring to be in effect the project architect on the two projects. The complaint alleges that Pickering acted willfully, intentiona

lly, malic iously, an d reckle ssly when it published and republished the report without correction and

that Pickerin g maliciou sly procu red the b reach o f MK’s two

contrac ts withLSSM. The complaint seeks both compensatory and punitive damages for the libel a nd also seeks recovery both under the common law and by virtue of T.C.A. § 47-50-109 (1995) for the procure ment of the

breach of the co ntracts. Pickering’s answer

denies th

e materi al allega

tions of the

complain

t and joins i ssu e thereon and aff irmatively avers that its report was privileged because the f irm was hired as an expert in anticipation of the chancery court litigation and the report wasissued in furtherance of that proceeding. Pickering denies that there was publication of the report and further denies that there was a breach of any contracts between LSSM and MK or that Pickering was in any way responsi ble for inducing an

y breach of such c ontract s. Prior to trial, the trial court granted a partial summary judgment to Pickering and ruled that the April 15 repor t was abso lu tely priv ileged in its publication to LSSM, members of the L SS M board, r

eprese ntatives o f Luther

an Churc h Extensio n Fund, Inc . (LSSM’s le nder), J im Carson (special master in the cha ncery c ourt), FB&D , and Unit ed States Fidelity & G

uaranty Company (t he bonding company). The court did not grant summary judgment as to th e publication to Omega Contractors, Inc. (Omega), the re placement contractor, Omeg a ’s subcontr actors, Thompson-White Associates (Tho mpson-White), the marketing agen t for LSSM , and T-W Concepts, Inc., the construction manager. After a five-week jury trial, the case was submitted to the jury as to the issues of th e alleged libel by publication of the report to Omega, Thompson-White, and T-W Concepts and

as to the issue of whether Pickering procured o r indu ced the b reach o f MK’s co ntracts with LSSM. In the libel action, the jury returned a verdict for MK in the a

mount of $6 00,000.00

in compens atory damages and $100,000.00 in punitive damages. In the procurem ent or inducemen t of breach of contr act act ions, the j ury awa

rded MK $750,000.00 as compensatory damages, and under T.C.A. § 47-50-109, the damages were tre bled. As a result of post-trial motions, Pickering was granted a judgment notwithstanding the verdict on the ac tions for p

rocure ment of br

each of contract.4 ISSUES Both MK and Pickering have appealed. MK presents the following issues for r eview: 1. Whether the trial court erred when it gra nted Pick ering’s Motion for Judgm

ent No twithstan ding the V erdict o n the cla im of tortious interference with contrac t t hat went beyond Pickering’s use of false statements in Pickering’s April 15, 1991 Inspection Report of Findings. 2. Whether the trial court on summary judgment and on judgmentnotwiths tand ing the verdict erred in expanding Ten n essee’s “witness privilege” to immunize the non-litigation use of the unsigned, unsealed, unsworn Report that was published by Pickering only in its corporate capacity, which containedfalse and malicious statements designed to induce LSSM to breach its contracts with MK and was thereafter used in th e construction process . 3. Whether the trial court erred in its February 9, 1995 Order On Pending Motions when it found thatMK had no existing binding contracts with which Pickering intentionally interfered. Pickering presents the following additional issues for our review:

1. Wh ether the trial court erred in not granting Pickering’s Motion for Directed Verdict on the libel claims that were not excluded by the previous ruling on Pickering’s Motion fo r Summary Ju dgment. 2. Whether the trial court committed error in not ruling that the verdict was contrary to the weight of the evidence in regard to the damages that were awarded. 3. Whether the court erred in not defining the correct burden of proof to the jury in regard to the statutory procurement of breach of contract claim of MK. FACTS On July 2, 1985, LSSM, a Tennessee not-for-profit corporation, entere d into a wr itten contract with MK fo

r architectura

l service s in conne ction with the design and construction of a five story, re sidential

home for the elde rly (Project A) tha

t was to be part of the Lutheran Village Proje ct. On July 27, 1988, LSSM entered into a second written contract with MK for architectural services in connection with the design and construction of twenty -five townhouse units for the elderly (Project B). Both of MK’s contracts with LSSM were standard American Institute of Architects architectural service s contracts. On May 15, 1989, LSSM chose FB&D

as the g ene ral cont

ractor on both pro

jects. Con struction

of Projects A and B be gan in August of 1989. In A

ugust or Se

ptember of 1990, L SSM contra

cted with Thompson- White

to market and sell the units in both projects. Problems arose during the construction, andin January 1991,3 At the time of this appeal, the chancery court litigation was still pending. 5 MK refused to certif y a draw request submitted b y FB&D. LSSM contacted Omega as a neutral party to evaluate the projects and to determine the quality of the c onstruction. On February 18, 1991, FB&D filedsuit in the chancery court against LSSM, MK, and Myers and Klime

k individua

lly. Beca use the chancer

y court la wsuit is re

levant to the iss ue s raisedin this appeal, we will examine the pleadings in that case. 3 In its comp laint, FB&D a lleges, inter alia , that LSSM br

eached its contra ct with FB&D

by not pay ing for a

ll the work performed

an d that MK i nterfered with the contract betwee n FB&D and LSSM by inducing LSSM’s breach. The complaint also alleges that MK was guilty of negligen t supervi sion with r

espect t o the const ruction p rocess: The Defendants, MK Associates, Carl D. Kl imek , individually, an d J oseph Myers, individually, breached their duty to Plaintiff by failing to

use ordinary care in the prepara tion of the plans and spec ificatio ns, supervis ion, inspe ction, ad mi nistration , coordination and in the performan c e of thei r contra ctual dut ies. Said breaches by Defendant s inc lude, without limitation: not allowing Plaintiff to perf orm w ork under the contract as it had scheduled, causing Plaintiff to perform an abnormal amount of work on the project; repeated failures to give proper a nd timely directions to Plaintif

f; failur e to design the

Project in

accordance withapplicable codes, laws and regulations; failure to p rovide adequa te and timely

job site sup ervis ion; failure to proper

ly evaluat e the work accomplished by Plaintiff; failure to certify payment request s; failur

e to spec ifically id entify pr oblems perceived in the work and issue punch l is ts in a timely and specific manne r so that corrections could be accomplished economically. On March 22 , 1991, LSSM entere d into a co ntract w ith Picker ing, a multi -discipli ne d engineering and architectural firm, to perform an indepe ndent , on-site , documented review of various asp ects of Pro

jects A and B and to determine the priority of items needed to be completed for a

certificate of occupancy. After completing its inspection, Pickering published

a report on April 15, 1991, titled “Inspection Report of Findings for Luther an Social Services of Memphis, Inc. of P roject A: Lutheran Village Mid-Rise and Project B: Townhouses” (Report). Pickering delivered

copies of the Report

to LSSM, Thompson-White, and Omega. On May 1, 1991, MK wrote a letter to LSSM and sent a copy of the letter to Pickering asserting that the Report containe d error s a nd expre ssing concerns about the impact the Report would have on MK’s professional reputa tion. Pickering did not respond to this letter and did not correct or4 The rec ord is unc lear as to whom Pick ering pub lished thisreport, however , to simplify proof at trial, MK did not rely on any communications other than the original Report except to the extent that other communications republished the text of the original Report. Conseque ntly, those

document s are not

releva nt to this ap

peal. 6 retract a ny statements made in the Report. Pickering published another report, dated July 16 , 19 91, tit led “Punch List Items Supplement To Inspection Report Of Findings For Lutheran Social Services Of Memphis, Inc.” J. Martin Regan, Jr., LSSM’s attorney, wrote a letter dated October 8, 1991 to Omega and

Pickering requesting their further assistance as expert witnesses in prepar in g addi tional documents to aid LSSM in the chancery court litigation. Pickering respo nded by a le tter and attachment dated October 11, 1991. Pickering also re published the entire text of the original Report in an “Interim Report for Lutheran Social Service s of Memphis, Inc.” dated November 25, 1991. 4 After Pickering published the original Report, MK’s relationshi p with L SSM deteriorated. James Stanton Hobbs, Pickering’s Project M anager , began negotiatin g with LSSM for archite ctural se

rvices in mid -to-late

April 1991 . On April

30, 1991, Pi ckering

sent LSSM

a contract for arc

hitectur al servic es. On May 16, 1991, LSSM filed its answer in the chancery

cour tlawsuit and a cross-complaint against MK alleging that MK breached its contra ct wit h LSSM, negligently prepared plans and specifications, and did not provid e proper contract administration. On May 28, 199 1, Picker ing and LSSM execute d a secon

d written contract, which provided that Pickering would perform “contract administrat ion” o n Project s A and B. On July 24, 1991, MK submitted a “Proposal For Services” to LSSM to “ prov ide contract administration basic services for the completion of L utheran Village based on a construction period of 120 days for $40,800.00.” LSSM did not accept MK’s proposal. On July 31, 1991, LSSM filed its answer s to interr ogatorie s propoun ded by FB&Din the chance ry court lawsuit and identified Pickering as an expert witness whose representatives would be c alled at that tria l. On August 28, 1991, LSSM sent MK a letter giving seven days written notice of termination of the contr acts bet ween the parties. The lette

r states: This letter is to s erve as seven days written notice of the termination of

the Agreements between Lutheran Social Services of Memp his, Inc. and MK Ass ociates Archite cts/Plann ers in connection with the projects co mmo nly known as the 25 Townhous e Units for Lutheran Village and the Atrium Building at Scheibler

Roa d and New

Covington Pi

ke, Memph

is, Tennessee. This notic e is given pursuant to the termination of7 agreement

provisions of the contrac ts and i s based upon your failure to substantially perform in accordance with the terms of the contr acts. On or abo u t October 14, 1991, MK, Myers, and Klimek filed a cross-ac tion in the chance ry suit against LSSM, alleging breach of contract, libel and slander, and negligence. In December

of 1991, L SSM filed a

n answer to MK’s cr

oss-act ion in the chancery court stating, inter alia , the following:

LSSM states that any actions which it took in terminating the Archite cts and retai ning the services of new Architects wer e taken i n order to mitigate its damages and to bring the pro ject t o completion in accordance with ap plicable codes, laws and industry standards and as a consequence of the bre ach by the Archite cts by their c ontract s as set forth in LSSM’s cross-c laim.

CONSIDERATION OF ISSUES We will consi der MK’sfirst two i ssues ra ised in thisappeal o f the cir cuit cour t lawsuit together: 1. Wh ethe r the trial court erred when it granted Pickering’ s

Motion for Judgm

e nt Notwithsta

nding the V erdict o n the cla im of tortious interfe ren ce with contract that went beyond Pickering’s use of false statements in Pickering’s April 15, 1991 Inspection Report of Findings. 2. Whether the trial court on summary judgment and on jud gment notwithsta

nding the v erdict e

rred in e

xpandin g Tennessee’s “witn ess privilege” to immunize the nonlitigation use of the unsigned, unsealed, unsworn Report that was published by Pickering only in its corporate capacity, which containedfalse and malicious statements designed to induce LSSM to breach its cont racts with MK and was thereafter used in the construct io n process . The trial court’s order granting Pickering a judgment notwi th standing t he verdi ct is premised on the trial court’s finding th at Picker ing’s stat ements in the Repor

t were a bsolutely privileged as commun

icated to LSSM, ther

efore b arring M K’s clai ms for induc ement to breach of contract, and also on the court’s finding that there were no existing binding contracts betwe en LSSM and MK. MK asserts that the trial court erred in granting the judgment notwithstanding the verdict for the following reasons: (1) there was no absolute privilege af forded the pub lica tion; (2) i f there were such a privilege, Pickering took actions other than the statements in the Report that procured or induced the breach of the contract; and (3) there w e re in existence two viable and binding contracts between LSSM and MK that were subject to breac h.8 The duty of a t

ria l or appellat e judge in dealing with a judgment notwithstanding a verdict is well established in our jurisprudence:

A post-trial motion for the entry of judgment in accordance with a motion for a directed verdict mad e during the trial must be gaugedby the usu al ru les rela ting to directed ver

dicts. Tho se rules require

that the tr ial judge , and the a

ppellate courts, take the stronges tlegitimate

view of the evidence in favor of the opponent of the motion, allow all reasonable inferences in his or her favor, discardall count erv ailing evidence, and deny the motion where there is any doubt as to the conclusions to be drawn from the who le evidence. A verdict should not be directed during, or after, trial except where a reasona ble mind could draw but one conclusion. Holmes v. Wilson , 551 S.W.2d 682, 685 (Tenn. 1977) (citations omitted). MK’s actions against Pickering for inducement to breac h a contract are based on the common la

w and on T .C.A. § 47- 50-109 (1 995). Sec tion 47-50 -109 prov ides: 47-50-109 . Procure

ment of br

each of c ontract s unlawful — Damages.— It is unlawful for any person, by inducem ent, persuasion, misrepresentation, or other means, t o in duce or procure the breach or

violation, refusal or failure to perform any lawful c ontract

by any pa

rty there to; and, in every case where a breach or violation of such contract is so procured, the person so procuring or inducing the same shall be liable in treble the amount of damages resulting from or incident to the breach of the contract. The party injured by such breach may bring suit for the breach and for s uch dama

ges. The statute is declar

atory of the commo n law exc ept as to th e amount o f damage s t ha t may be recovered against a wrongdoe r. New Life Corp. of

America v. Thomas Nelson, Inc. , 932 S.W.2d 921, 926 (Tenn. App. 1996) (citing Emmco Ins. Co. v. Beacon Mut. Indem. Co. , 204 Tenn. 540, 551, 322 S.W.2d 226, 231 (1959)). In Emm co Insura nce Co. v. Beaco n Mutual Indemnity Co. , 204 Tenn. 540, 322 S.W.2d 226 (1959), our Supreme Court stated:

The Code Sect

io n relied on (47-1706, T.C.A. [now T.C.A. § 47-50-109] ) and made the basis of this action . . . contemplates the improper inducement, and we might add the unlawful conduct, of the alleged wrongdoer whereby a contract is broken. The statute contemplates the imposition of a severe penalty, “and should not be enforced except upon a clear showing.” Lichter v. Fulcher , 22 Tenn. App. 670, 125 S.W.2d 501, 508. Emmco Ins. Co. , 204 Tenn. at 549-50, 322 S.W.2d at 230-31. The elements of a cause of action for proc urement of the br each of a contract are: 1) there must

be a legal contract; 2) the wrongdoer must have knowledge of the existence of the contract; 3) there must be an intention to induce its breach; 4) the wrongdoer must have acted9

maliciously; 5) there must be a breach of the contra ct; 6) the act complained of must be the proximate

cause of the breach of

the contract; and, 7) there must have been damages resulting from the breach of the contract. New Life Corp. , 932 S.W.2d a t 926 (c iting Campbell v. M atlock , 749 S.W.2d

748, 751 ( Tenn. Ap

p. 1987); Dynamic Motel Management, Inc. v. Erwin , 528 S.W.2d 819, 822 (Tenn. App. 1975)). Con sidering the basis of the trial court’s grant of the judgment notwithstand ing th e verdict and keeping the above rules in mind, we must determine whethe r the statements in the Report that Picke

ring commu

nicated to LSSM were pr

ivileged , and if

so, whether the privilege should apply to a cause of action for procurement of a breach of the contract. Our inquiry, under the above rules, is premised on acceptance of the fact that defamatorystatements were made by Pickering in the Report and communicated to LSSM. Tennessee has long recognized tha t state ments made in the course of judicial proceedings

are absolutely privileged. See, e.g. , Lea v. Whi te , 36 Tenn. (4 Sneed) 111, 114 (1856) (holding that statements made in a return to a writ of habeas co rpus were a

bsolutely privileged so as to bar a cause of action for libel). This abso lute privilege also applies to statements made by witnesses in the cou

rse of ju dicial pr

oceedin gs. Se e, e.g. , Shadden v. McElwee , 86 Tenn. (2 Pick.) 146, 5 S.W. 602 (1887 ) (asse rting that a witnessis absolutely privileged as to all matters relevant to the issues in the case). In Jones v. Trice , 210 Tenn. 535, 360 S.W.2d 48 (Tenn. 1962), the Tenn essee Sup reme Courtdiscusse d the abso lute privi lege app licable t o judicial proceedings. In that case, Jones had attendeda trial in which Trice was a defendant as executrix of a n estate. Id. at 49. After a jury verdict against Trice, she moved for a new trial on the ground, inter alia, that Jone s imprope rly influenced

the jury in her case. Id. When Jones sued Trice for libel based on the allegati ons in her motion for

a new tri al, Tric e demurr ed on the g

round tha t the state ments were absolut ely privileged because they were made in the c ourse of a judicial proceeding. Id. at 50. On appeal of the trial court’s order sustaining the demurre r, the Court stated: The gene ral rule is that sta

tements ma

de in the c ourse

of judicial proceedings which are relevant a nd pertinent to the issues are absolutely privileged, and therefore cannot be used as a basis for a libel action for damages. This rule holds true even though such statemen

ts are fa lse, know n to be fa

ls e or eve n malicious. Id. (c itations omitted). The Court further set forth the view contained in the Restat ement o f10

Torts : “A party to a private litigation . . . is abso lutely pri vileged t o publis h false and defamatory matter of another i n communications preliminary to a proposed j udici al proceeding , or in the institution of or du ring the course and as a part of a judicial proceeding in which he participates, if the matter had some relation thereto.” Id. at 51 (quot ing Restatem ent of Tort s § 587)(emphasis added). From these and other authoriti es, the Court r

easoned th at “a statem ent by a judge, witness, counsel, or party, to be absolutely privileged, must meet two condition s, viz: ( 1) It must be in the course of a judicial proceeding, and (2) it must be pertinent or relevant to the issue involved i n said judi cia l proceeding.” Id. at

52. The Court noted that pertinency and relevance a re questions of law. Id.

a t53 (citing 33 Am. Jur. § 150, at 1 46). Conc luding tha t Trice’ s stateme

nts m et thes e requ irements and wer

e absolut ely privil eged, the

Court held

that the tr

ial cour t corre ctly sustained the demurrer. Id. at 54-55. Although there are no cases in Tennessee directly on point, Pickering relies on cases from other jurisdictions in support of its contention that an absolute privilege applies to reports made by a potential witness in contemplation of litigation. In Western Te

chnologies

, Inc. v. Sv erdrup & Parcel, Inc. , 739 P.2d 1318 (A riz. Ct. App 1986), the Arizona Board of Regents (Board) retained Wester n Techno logies, Inc. (W est ern), an engineering firm, to perform testing for a proposed expansion of a stadium. Id. at 1319. Western performed the testing, and the expansion

was complete d in the la

te 1970s. Id. Shortly thereafter, cracks developed in the stadium. Id. The Board retained

Sverdrup & Parcel , Inc. (Sv erdrup) , an engin eering f irm, to investigate the

cause of the cracks. Id

. Sverdr up prepared reports that blamed Western f or the structural defect s. Id. The Board sued a number of parties, including Western, to recover for the expe nse of repairing the stadium. Id. After reaching a settlement with the Board, Wester n brought su

it ag ainst Sverdrup for, inter alia, injurious falsehood to recover for damages it paid in t h e settlement

and for damages for loss of business. Id. at 1319-2 0. Sverdr up asser ted the de fense of absolute privil e ge in its role as an expert witness. See id. at 1320-21. The court held that Sverdrup’s reports wer e privi leged because the Board was seriously contemplating litigation, the reports were “‘a nece ssary step in taking legal action,’” and the Board actually relied upon the reports in bringing suit. Id. at 1322.11 Pickering also relies on General Electric Co. v. Sargent & Lundy , 916 F.2d 1119 (6th Cir. 1990), in which Kentucky Utilities informed Sargent & Lundy (Sargent), an engineering firm, that it wa s conside

ring litiga tion agai nst the fir

m to reco ver the c osts for repair and redesign of one of Sargent’s projects. Id. at 1122. Sargent signeda waiver of the statute of limitations and prepare d report s blaming Envirotech, a company subsequently purchased by Gene ral Electric, for the problems. Id. When Kentucky Utilities sued General Electric, GEESI ( a wholly owned subsidiar

y of Gene ral E lectric), Envirote ch, and Sa rgent, General

Electric and GEESI filed cross-claims against Sargent for injurious falsehood. Id. at 1123. Sa rgent the n sought to exclude as absolu

tely privi leged the

document s and stat

ements it m ade aft

er exec uting the s tatute of limitati ons waiver because they were ma de in contemplation of litigation. Id. The dist ric t court held that the docum

ents and s tatement s were n ot privile ged and th at, even if they were privileged, Sargent lost the privilege because the statements were made in furtherance

of a fraud. Id. Sargent

appealed, and at the time, Kentucky cou rts had no t yet had t

he oppor tunity to addresswhether an absolute pri vilege app lied to statements made preliminary to judicial p roceed ings. Id. at 1126. N oting that K entucky c ourts ofte

n turned t o the prov

isi ons of th e Rest atement (Sec ond) of Torts for guidance with respect to the absolute privilege, the cour t reliedon § 587 of the Restatem e nt (Second ) of Torts in holding that such statements are absolutely privileged if they are made in contemplation of litigation. Id. a t 1125-26 (citing Restateme

nt (Second) of

Torts § 587, at 248). Concluding that Sargent’s documents and statemen ts met these requirements and were absolutely privileged, the court reversed the district court. Id. at 1129. Accord Kahn v. Burman , 673 F. Supp. 210 (E.D. Mich. 1987) (holding that witness immunityencompasses reports prepared by witnesses before litigation even though not made under o ath because they are releva nt to judicial proceedings), aff’d , 878 F.2d 14 36 (6th Cir. 1989); Adams v. Peck , 403 A.2d 840 (Md. Ct. App. 1979) (holding that privilege extends to communic ations mad

e by witne sses bef

ore tria l, including a repor

t prepar ed by a ps ychiatr

ist, if relat ed in some

way to the

pending litigation) ; Durand Equipment Co. v. Superior Carbon Products, Inc. , 591 A.2d 987 ( N.J. Super. Ct. App. Div. 1991) (ho lding that a bsolute imm

unity extends to docume

nts used in

prepar ation for judicial p roceed ings) ; Bruce v

. Byrne-St

evens & Assocs. Eng’rs, Inc. 776 P.2d 666 (Wash. 1989) (holding that a report prepared be fore trial by12

an engineer who had been retaine d as an expert witness was privileged). Prior to LSSM’s hiring of Pickering, FB&D, the general contractor for both p

rojects in Lutheran Village, filed suit against LSSM and MK

in the cha ncery c ourt. As to

LSSM, FB&D’s complaint seeks, among other things, enforcement of a mecha nic’s lien and recovery for brea ch of contr act or un der quantum meruit. FB&D’s complaint also seeks recovery from MK for interferen ce wit h a contract and for negligent design and supervision of the projects in breach of their contractual du ties as archi tects. Proof was introduced in the instant case that the Pickering firmwas hire d to provid e exper t witnesse s and to fu

rnish info rmation to

LSSM concerning the defects in the construction, any problems with t he design, an d what entity or entities were re sponsible

for the p roblem. Pickering was also employed to provide solutions for the existing p

roblems and estim ate the cost of correcting the problems. Although Pickering might have had a

dual role, it seems clear that the information Pickering furnished waspertinent and releva

nt to the iss ues drawn in th e chanc ery cour t lawsuit a

nd perha ps could c onstitute essential evidence for LSSM’s defense. MK contendsthat the Re

port was u

nsigned, unseale d, and issu ed by Pick ering in it s corpora te capaci ty. We mus t respec tfully disa gree wit h this cha racter ization. The Repor

t is merely an assimilation of the information compiled by various representatives of Pickering in their role as e

xpert wit nesses in the chan cery co urt litigatio n and in an

ticipatio n of their upcoming testimony in that proceeding. In Jones v. Trice , 210 Tenn. at 535, 360 S.W.2d at 4 8, our Supr eme Court

strongly endorsed a liberal application of the absolute privilege accorded to pu blicat ion of defamatory matters in connection with judicial proceedings. The Court said:

Underlying t hi s genera

l doctrine of absolu

te immunity from liability in

li be l and slander for statements made in the course of a judicial proceeding is a policy decision by the cour ts that access to the judicial process , freed om to institu

te an action, or d efend, or participate therein without fear of the burden o f being sued for

defama tion is so vit

al and ne cessar

y to the inte grity of our judicial system that

it must be made paramount to the right of an individual to a legal remedy where he has been wr onged thereby. 360 S.W.2d at 51. The Court’s r eliance in Jones on the Restateme nt of Torts also indic ates its willingne ss to extend the doctrine to communications pre liminar y to proposed or pending litigation. Th erefor

e, we hol d that Pick

ering’s Report aspublished to LSSM is abs olutely13

privileged. Although we find that a privilege existed, this does not end the inquiry. We must now determine whether the absolute privilege includes MK’s actions based upon the procurement or inducement

of breach o f contract. In ruling on the motion for a judgment notwithstanding a verdict , the trial

court re lied on two

cases: Lann v. Third Natio nal Bank , 198 Tenn. 70, 277 S.W.2d 439 (1955), and Middlesex Concrete Products & Excav atin g Corp. v. Carteret Indu strial

Ass’n , 172 A.2d 22 (N. J. Super. Ct. App. Div. 1961). In Lann , the plai ntif f, a businesswoman, sued the bank f or what istermed in

her pleadings as interference with and injury to her business. Lann , 277 S.W.2d at 440. She a

lleged in her bill th at the ba

nk had mad

e false and defamatory statements in a suit seeking to recover a debt. Id. The bill

stated tha

t the suit

was for “slander of property, based upon the alleged false and defamatory matter obtained in the original bill in a prior case, and .

. . moral or business duress based alike on said alleged false a nd defamatory matter and other facts and c ircumstances.” Id. The defendant bank’s demurre r to the bill was sustained. On appeal, our Supreme Court held that the averments in the ba nk’ s pleading s, although false and malicious, were absolutely privileged beca use they were made

in the course

of judicial proceedings and were releva ntto those proceedings. Id. The Court noted that Lann’s action was based in part on tortious interferenc e with her business. Id. In affirming the trial court, the Court concluded that “if privileged for one p urpose [the statements] must be privileged for all others.” Id. at 443. In Middlese

x Concrete Products & Excavating Corp. v. Carteret Industrial Ass’n , 172 A.2d 22 (N.J. Super. Ct. App. Div. 1961), an engin eering f irm was r etained as a cons ultant in

a pending lawsuit between a construction firm and a city borough arising out of the construction of a se wage treatment plant. Id. at 23. The enginee ring firm perfor med an inv esti gation , published a repor

t, and tes tified at

trial as a n ex pert witness. Id. at 24. The construction firm sued the engineering f

irm for to

rti ous inter ference with contractual and business rights and relation s. Id. at 22. On a ppeal, th e court a sserted

that “sta tements ma

de in judic ia l or quasi

judicial proceedings and having some relation thereto are absolutely privileged against a suit for defamation.” Id. at 25 (citations omitted). The court further asserted that the privilege extende d to preliminary conferences and steps taken in preparation of the case for trial. Id. The cour

t held that the engineering firm’s repo rt, consultations, aid, and advice were render ed as a part of a14

judicial proceeding and could not be the basis of a suit for

tortious in

terfer ence be cause to

hold otherwise would circumvent the absolute privilege. Id. at 25-26. Pickering further relies on Western Te chnologies

, Inc. v. Sv erdrup & Parcel , 739 P.2d 1318 (Ariz. C t. App. 198 6), in supp ort of its argumen t that MK’ s claims f or induce ment to breach of contract are

barred by the absolute privilege. In that case, the court addresse d whether Western’s claim for tortious interference with bu siness was barred by the same absolute privilege that barred its claim for

injurious falsehood. Id. at 1322. The court asserted that the importance of protect ing witnes ses from l

iability arising out of their

roles in th

e judicia l proces s outweighs competing considerations. Id. at 1323. The co urt rea soned tha t “it would

be illogic al to hold that the repr esentat i ons . . . made are absolutely privileged in the context of an injurious falsehoodaction, but that

the same repres entation s are not

privileged in the co ntext of a suit for contractual interference.” Id. Thus, the court held that Western’s claim for tortious interfere nce was barred by the same privilege that barred the injurious falsehood action. Id. at 1324. In Lann , our

Supreme C ourt rec ognized t he exten sion of the

absolute privilege to causes of action other than actions for defamation, and cases f rom other jurisdictions support such an extension. Therefore, we hol d tha t the absolute privilege afforded a publication of false a nd defamatory statemen

ts in the co

urse of j udicial p

roceed ings appli es to an action for procurement or induce ment of br

each of contract based on

those fa lse and de famator y stateme nts. MK also asserts that Pickering’s act ions, apa rt from th e allege dly defa

matory Re

port, procured or induced the breach of the contracts with LSSM. However, from our review of the record, it appears that

a deter mination by

LSSM to term

inate the contracts with MK emanated from the infor mation fur

nished to L SSM in the Re port conc erning MK ’s perf ormance of its contracts. Accordingly, we find that the absolute privilege applies and that the trial court

correc tly granteda judgment not withst anding the verdict on the actions based upon the procurement of breach of contr act. In view of our ruling on MK’s first two issues, we pretermit MK’s third issue. Pickerin g’s first

issue for review i s: 1. Whether the trial court erred in not granting Pickering’s Motion for Directed

Verd ict on the libel claims that were not excluded by the previous ruling on Pickering’s Motion for15 Summary Ju dgment. Pickering first asserts that the trial court erred w hen it denied Pickering’s motion for a directed verdict because there was no publication to Omega or Thompson-White. Pickering’s assertion is made in r

eliance on this Cour

t’s holding

in Woods v. He lmi , 758 S.W.2d 219 (Tenn. App. 1988). In Woods , the plaintiff, a certified register ed nurse anesthe tist, brought su

it against her immediate supervisor and others seeking damages for allege d defa mation and wrongful interference

with emplo yment. Id. at 220. Th e plaintif f and her supervis or were

bothemployed by the Regional Medical Center in Memphis (The Med). Id. The Medhad a unique arrangement for the oper ation of it s anesthe siology de partmen t in that it h ad its own paid e mployees and also had physicians provided by the University of Tennessee employed as par t of the staff of The Med. Id. at 220-21. The plaintiff’s supervisor issued a memo conc erning operating room behavior of the pla

intiff tha t was sent

t o persons w ho “had managerial, supervisory or administrative responsibilities and oversight for [the] internal affairs of The Med’s anesthesiology department and were immediately interested in the information transmitted.” Id. at 2 22. The Court noted that communication of defamatory matter between the agents an d officers of the corporation in the ordinary course of busines s is not a publication. Id. (citing Freeman v. Dayton Scale Co. , 159 Tenn. 413, 19 S.W.2d 255 (Tenn. 1929)). In this vein, the Court said: While many of the cases denying the existence of a publication speak in terms of corporations communicating to or with itself, it seems to this Court that more essential to the issue is the concept of “need to know,” with the communication flowing through the proper chain of comma

nd, parti cularly

in employee performance reviews or disciplinary action. It could r eadily be argued that the concept of intra-corporate communications would not apply if, in the case of a review by corpora te supe riors of the alleged misconduct

of a branch manager, the circumstanc es surrounding his misconduct were c ommunica ted als o to the corporation’s truck driver o r janitor , who obvio

usly would

not be in the “need to know” pipeline. Id. at 223. Pickering asserts t hat disseminating the report to Omega and to Thompson-White was necessary because they had a “n eed to kno w” in ord er to per form thei r function for LSSM. We believe Pickering’s reliance on Woods is misplaced. In Woods , the dissemination of the alleged defamatory material was made within a particular managerial structure , albeit one involving two16

different entities. In the case at bar, the publication of the defa matory materi al was ma

de to separa te entities and clearly would not fall within the rule e stablis hed by Freeman v. Dayton Scale , 159 Tenn. at 413, 19 S.W.2d at 255. Picke

ring commu

nicated the defa matory sta

tements to the distinctentities of Omega and Thompson-White. Communicating a defamatory statement to a third person es ta blishes the element of publication for a libel claim. Little Stores v. Isenberg , 26 Tenn. A

pp. 357, 17 2 S.W.2d 13 (Tenn. A pp. 1943) . This a rgument is without merit. Pickering next asse rts that the absolut

e privile ge affo

rded to th e communica

tion to LSSM

cou ld also be a

fforde d to Thompso n-White and Omeg a becau se they ha d a legal necessity fo r the R eport as co-w itnesses f or LSSM in the

chance ry court lawsuit. W

e must res pectful ly disagree. The primary role of Omega was to complete the work necessary to f inish the project s, and the primary job for Thompson-White was to market the projects. LSSM retained Picker ing to determine cause and effec t, thus Pickering’s Report to LSSM for use in the d e fense of the chance ry lawsui t was in furtherance of that legal

proceeding. However, the publication of the Report t o Omega, the contr actor e mployed to

finish the

project , and Thom

pson-Whi te, th e marketing entity, was not re lated to the legal proceedings in the chancery cour t. Therefore, the trial court correctly ruled that there was no privilege in the publication of the Report to Omega and Thompson-White. Pickering next asserts that the essential elements of libel were n ot proven. Pickering states in its brief:

Pursuant to the Tennessee Pattern Jury Instructions, the following are the elements for libel: 1) t he def endant c ommunica

ted to persons other than the plaintiff s a statem ent throu gh its Apri l 15, 1991 Report concerning the plaintiffs that was a libel as that term [is] defined in the instructions; 2) the defend ant was guilty of negligence in failing to determine the truth of the statement prior to communicating it or that the defendant communicated the statement with knowl edge tha

t it was false; 3) the libel was read or heard by persons other than the plaintiff s, who unde

rstood its libelous meaning and th at it referred to the plaintiffs; and 4) the plaintiffs were injured by thecommunication of the libel; and 5) the statement about

the plaintiffs was false. ( See T.P.I . - Civil - 7.02). We agree that Pickering correctly states the law. Picke ring specifically argues that MK failedto prove the third element and the fourth element. The third element require s that a third person read the publication and understand its libelous meaning and that the publication refers17

to the plaintiff. Pickering argues that although it is conceded that Omega received a

copy of the Report, there is no proof that any one at Omega read the Report or understood its libelous meaning and that this holds true also for Thompson-White. However, the record indicates that Omega received the Report for its use in bidding on the project for completion of Luther an Village and that T

hompson-W

hite received the Report in connection with its marketing efforts for bo th projec ts. The record further indicates that during the c ourse of the corrective construction work, pe

riodic meetings were held in which the Report was referred to concer

ning the remedial work required. This rec ord has a mple proo f that Ome ga and Th ompson-W hite read the Report and relied on its many false statements concerning defective de sign and co de violations to finish the projects. Moreover, whether Omega and Thompson-White unde rstood the defamatory meaning of the Report was a question for the jur y. Me mphis Publ’g Co. v. Nichols , 569 S.W.2d 412, 419 (Tenn. 1978). This argument is without merit. Pickering also asserts that the fourth element of libel is not present because MK failed to prove an y damages resulting from the alleged defamatory stateme nts communicated to O meg a and Thompson-White. Without going into d

etail on a ll of the da

mages, the jury a

warded MK recovery for emotional distress resulting from the publication of the false and defamatory statemen ts. Certainl

y each publicatio n would re sult in additional emotional distress, and there is material evidence

that coul d indicat

e emotional distress resulting from the communication of the defamatory statements to Omega and Thompson-White. Accordingly, the trial court correctly denied Pickering’s motion for a directed verdict on the libel claims that were not exclud ed by the previous ruling on Pickering’s motion for summary ju dgment. In its secon d issue, Pic

kering a sserts tha

t the tria l c ourt er red in not ruling that the damages awarded by the jury on the libel cla ims were excessive. If there is any mater ial evidence to support

th e awar d of damages, we must affirm the judgment. T.R.A.P. 13(d). In making this deter

mination, e

very re asonable

infere nce must be drawn in favor of

MK. Moore v. Bailey , 628 S.W.2d 431, 434 (Tenn. App. 1981) (citations omitted). Under Tennessee law, a plaintiff is required to prove actual damages in all defamation

cases. Handley v. May , 588 S.W.2d 772, 776 (Te nn . App. 1979). The actual damage requirement

was discu ssed by the

United Sta

tes Supre me Court in Gertz v. Robert Welch, Inc. ,18

418 U.S. 323, 94 S. Ct. 2997, 41 L. Ed. 2d 789 (1974):

We nee d not defi ne “act ual injury ,” as tria

l courts h ave wide experience

in framing appropri at e jury ins tructionsin tort ac tions. Suffice it to say that actual injury is not limited to out-of-pocket loss. Indeed, the more customary types of actual har m inflicted by defamatory fal seho od include impairment of reputation and stand in g in the community, personal humiliation, and mental anguish and suff ering. Of course, juries must be limited by appropr iateins tructio ns, and all awards must be supported by competent

evidence concerning the injury, although there need be no evidence which assigns an actual dollar value to the injury. Id. at 349-50, 94 S. Ct. at 3012. The failure to prove special damages or out-of -pocket losses is not necessarily determinative. Handley , 588 S.W.2d at 776. The issue is whether the record contains any material evidence of impairment of reputation and sta nding in the community, personal humiliation, or mental anguish and suffering. Id. The am ount of damages assessed depends on the degree of moral turpitude of

th e defendant’s conduct. Saunders v. Baxter , 53 Tenn. (6 He i sk.) 369, 385 (1871). Absence of malice may b e shown by the defendant’s retraction of the libel to mitigate the damages. See Knoxville Publ’g Co. v. Taylor , 31 Te nn. Ap p. 368, 375 , 215 S.W.2 d 27, 30 (1 948). Unl ess “actual mal ice” is shown, punitive damages are not permitted. Memphis Publ’g Co. , 569 S.W.2d at 421. A refusal to retract after a request for retra

ction is made or the republication after notice is given of the falsity of the statements is evidence of malice. See e.g. , Vigil v. Rice , 397 P.2d 719 (N.M. 1964) (holding that refusal to retract defama tory statem ents is evidence of malice to destroy a qualified privilege); Morgan v. Dunn & Bradstreet, Inc. , 421 F.2d 12 41 (6th Cir. 1970) (holding that republication after knowledge of the falsity of the defa matory sta

tements is sufficient evidence of malice to support punitive damages). In Handley v . May , 58 8 S.W.2d 772 (Ten

n. App. 19 79), this Court considered whether there was any material evidence

on the issue of damages to submit an action for slander to a jury. Id. at 776. The plaintiff’s tax returns showed that she did not suffer any lost r evenue s to her bu siness after the alleged slander

was uttered. Id. Asserting that the failure to prove out-of-pocket loss was not dispositive, the Courtexa mined the r ecord for evidence of ac tual harm. Id. The evidence indicated that the plaintiff was under mental stress independent from the slande r, that the sland

er “wa s quite upsetting” to the plaintiff, and that she was unable to concentrate in her business. Id. at 776-77. Because “mere an noyance or loss of peace of mind do not constitute recover able special5 We note t hat the ve rdict in th is case isa joint ve

rdict, wh ich does n ot comply w ith T.C.A. § 25 -1-104 ( 1980) re quiring th at the ve rdict sta te separ ately the amount aw arded to each plaintiff. From our review of the recor d, it appears that this requirement has been waived. See Pridemark Custom Plating v. Upjohn Co. , 702 S.W.2d 566, 574 (Tenn. App. 1985). 19 damages,” the C ourt held that there was no material evidence on the issue of damages. Id. at 777. In Moore v. Bailey , 628 S.W.2d 431 (Tenn. App. 1981), this Court considered whether

an award of compensatory and punitive damages for defamation was excessive. Id. at 434. In that case, the defendant made acc usations about the plaintiff, a county environmentalist for the Tenne ssee Departm

ent of Public Health, to the state inspector general and to the plaintiff’s supervisor. Id. at 432. The plaintiff sued the defen dant for sland er, and the jury returned a verdict in favor of the pla intiff an d award

ed $1,000 .00 in

compensatory damages and $5,000.00 in punitive d amages. Id. at 433. The defendant appealed the jury ver dict, asserting that there

was no mater

ial evide nce to support the recovery of compensatory or punitive damages. Id. at 434. The Court

pointe d out that t

he plaintiff put on proof from which a jury could find he suffered minimal out-of-pocket loss because of lost time from work and lost vacation time and incurred expenses in traveling to respond to the charges made by the de fendant. Id. The Court fur ther pointed out the jury could find from the plaintiff’s own testimony that he suff ere d humiliation and mental anguish as a result of the defendant’s actions. Id. Thus, the C ourt concluded that there was material evidence to support the jury awards. Id. Under the principles above, we mu st determ ine wheth er ther e is mater ial evide nce to support the amounts aw a rded by the jury on the libel claims, which included $150,000.00 for emotional distress, $250,000.00 for pecuniary loss es, $200,000.00 for injuries to MK’s reputat ion, and $ 100,000.0 0 for puni tive dama ges. 5 The record

is replet e with tes timony concerning the emotio nal distre ss tha t Myers and Klimek suffered as a result of the Report. Myers testified that he spent forty years of his life building h is reputation in the architectural business and that the statements in the Report devastated

and hu mi liated him

and cau sed him to b ecome se verely d epresse d. Klimek a

lso testified that the st

atementsin the Repo

rt cause d him grea

t distress . Although

this t estimony related to the orig inal public ation of th e Report, it is reas onable to in fer tha t M K suffered the20

sameemotional distress from each publication of the Report, including the publication to Omega and Thompson- White. Under th e princi ple s above, there is material evidence to support the amount aw arded f

or emotion al distre ss. As for the $250,000.00 awarded by the jury for pecuniary losses, MK

points out th at it is no longe r in existen ce and that Myers and Klimek are no longer pra cticing architecture. However, there is no evidence that this was a r esult of the publication of the Report to Omega and Thompson-White and not a result of thepublication of the Repor

t to LSSM. The

re is also

no evidence that MK suf

fered a ny pecun iary losse s or lost

any potential business opportunities withOmega or Thompson-White by virtue of the p ublicati on of the R eport to those entiti es. There is no material evidence in the recor d to support this award. The jury further awarded

MK $200,000.00 for the injuries to its reputation as a result of the publicat

ion to Omeg a and Tho mpson-Wh ite. The o nly evide

nce in the record with respect to any possib le injury t

o MK’s re putation isMelvin O’Brien’s testimony that the publication of such a report

would injure an architect’s reputation. However , there is no testimony or evidence in the rec ord esta

blishing tha

t MK actua

lly suffe red injur ies to its r eputation as a result of the publication to Omega and Thompson-White. After reviewing the record, we conclude that the evidence indicates that the injury MK suffered to its reputat ion, if any, resulted from the privileged communications of the Report, MK’s replacement by Pickering as project

archite ct, and MK’s termination by LSSM. There is no material evidence to support this award. The jury also awarded $100,000.00 in punitive damages to MK on the libel claims. The record indicates that MK requested that Pickering correct the e rrors or retract the defamatory statemen ts in the Repor t, but that Pickering failed to do as MK requested. This is sufficient evidenc e of Picke

ring’s a ctual mal ice to sup port the ju

ry awar d of puniti ve damag es. Under the principles above, we conclude that ther e is no material evidence to support the $200,000.00 awarded to MK for injuries to its reputation or the $250,000.00 awarde d to MK for pecuni ary losses, but that there is material evidence to support the $150,000.00 awar ded fo r emotional distress and the $100,000.00 awarded as punitive damages. Because of our conclusion that the absolute privilege bars MK’s claims for inducement of breach of contract, Pickering’s third issue is prete rmitted. A ccordingly, the trial court’s judgment on the jury verdict is modified to award M K21

$150, 000.00 compensa

tory dama

ges and $ 100,000.0 0 punitive damages . As modifi ed, th e judgment on the jur y verdict is affirmed. The order of the trial c ourt granting a judgment notwithstanding the verdict to Pickering on the causes of action for inducement or procurement of breach of contract is affirme d. Costs of appeal are assessedone-half to appellants and onehalf to appell ees. The

case is remanded to the trial court for such further proc eedings as may be necessary.

_________________________________ W. FRANK CRAWFORD, PRESIDING J

UDGE, W.S. CONCUR:

____________________________________ DAVID R.FARMER,

JUDGE

____________________________________ HEWITT P. TOMLIN, JR., SENIOR JUD GE