Opinion ID: 2636660
Heading Depth: 2
Heading Rank: 1

Heading: the trial court properly granted the motion for directed verdict on the defamation claim

Text: ¶ 18 Mr. Ferguson argues that the trial court erred in granting the directed verdict by misapplying Utah law to require evidence that Defendants knew the statement was false or that they acted in reckless disregard as to the falsity of the statement rather than applying the lesser standard of lack of reasonable grounds. ¶ 19 The question of what standard applies to determine an abuse of privilege presents a question of law, which we review for correctness. See O'Connor v. Burningham, 2007 UT 58, ¶ 38, 165 P.3d 1214. We review a trial court's grant of directed verdict for correctness. Goebel v. Salt Lake City S. R.R. Co., 2004 UT 80, ¶ 10, 104 P.3d 1185. We will sustain a directed verdict if after `examining all evidence in a light most favorable to the non-moving party, there is no competent evidence that would support a verdict in the non-moving party's favor.' Daines v. Vincent, 2008 UT 51, ¶ 20, 190 P.3d 1269 (quoting Merino v. Albertsons, Inc., 1999 UT 14, ¶ 3, 975 P.2d 467).
¶ 20 The trial court determined that Defendants, as Mr. Ferguson's employer, had a conditional or qualified privilege in making the defamatory statement to UMIA, an interested party, concerning Mr. Ferguson. Mr. Ferguson does not contest the existence of this conditional privilege. Rather, the burden having shifted from defendant to plaintiff, see Brehany v. Nordstrom, Inc., 812 P.2d 49, 58 (Utah 1991), Mr. Ferguson argues that Defendants abused and therefore lost the conditional privilege. ¶ 21 We have previously noted that a plaintiff can show abuse of a conditional privilege where a statement is made with knowledge of its falsity or with reckless disregard as to its falsity. See O'Connor, 2007 UT 58, ¶ 37, 165 P.3d 1214. This court also noted, `The publisher's lack of belief in the truth of the defamatory matter published, or his lack of reasonable grounds for so believing ... is important as constituting an abuse of the occasion which deprives him of the protection which it would otherwise afford.' Hales v. Comm'l Bank of Spanish Fork, 114 Utah 186, 197 P.2d 910, 913 (1948)(quoting Restatement of Torts § 594 cmt. b (1938))(emphasis added). [1] Mr. Ferguson asks that we abide by our dicta in Hales and allow him to show Defendants lacked reasonable grounds for their statement, and as a result abused their conditional privilege. Given the changes in defamation law since the 1938 publication of the Restatement of Torts, which we relied on in Hales and from which the lack of reasonable grounds standard is derived, 197 P.2d at 913, we can no longer abide by prior pronouncements. ¶ 22 The Supreme Court of the United States altered the landscape of defamation law with New York Times Co. v. Sullivan, 376 U.S. 254, 84 S.Ct. 710, 11 L.Ed.2d 686 (1964). There, the Court determined that the free speech rights of the First Amendment prohibited a public official from recovering on a defamation claim under state law unless the official proved the statement was made with actual malice, that is, knowing it was false or with reckless disregard as to its falsity. Id. at 279-80, 84 S.Ct. 710. A decade later, the Supreme Court further altered state defamation law. In Gertz v. Robert Welch, Inc., the Court held that so long as they do not impose liability without fault, the States may define for themselves the appropriate standard of liability for a publisher or broadcaster of defamatory falsehood injurious to a private individual. 418 U.S. 323, 347, 94 S.Ct. 2997, 41 L.Ed.2d 789 (1974). The Court further held that the States may not permit recovery of presumed or punitive damages, at least when liability is not based on a showing of knowledge of falsity or reckless disregard for the truth. Id. at 349, 94 S.Ct. 2997. ¶ 23 The Restatement (Second) of Torts recognizes the impact of Gertz on state defamation law and, in particular, conditional privileges. The Restatement explains that because of Gertz, strict liability in defamation is unconstitutional and that a publisher can be held liable only if he was at least negligent regarding the falsity of the statement. Restatement (Second) of Torts § 600 cmt. a (1977). Thus, mere negligence as to falsity, being required for all actions of defamation, is no longer treated as sufficient to amount to abuse of a conditional privilege. Id. cmt. b. Accordingly, the Restatement no longer recognizes the once majority rule of lack of reasonable grounds; instead, one who upon an occasion giving rise to a conditional privilege publishes false and defamatory matter concerning another abuses the privilege if he (a) knows the matter to be false, or (b) acts in reckless disregard as to its truth or falsity. [2] Id. § 600. Since the publication of the Restatement (Second) of Torts, several courts have followed suit. [3] ¶ 24 We agree with the rationale set forth by section 600 of the Restatement (Second) of Torts. If Gertz requires a private plaintiff to prove that a defendant negligently published a defamatory statement regarding a private concern, then lack of reasonable groundsor in other words, negligenceloses its significance in the conditional privilege setting. The lack-of-reasonable-grounds standard would offer no more protection to a privileged statement than exists in a purely private defamation action. We recognize that our cases have indicated, in dicta, that in a purely private defamation action the requisite degree of fault is negligence. [4] However, while these cases accord with the rationale of the Restatement (Second) of Torts, this proposition of negligence stems from those cases involving a private plaintiff and a public concern, in which negligence is clearly required to establish a claim for defamation. [5] Consequently, we have not directly decided the degree of fault necessary, if any, in a purely private defamation action. We expressly so note because we recognize that the rationale of the Restatement may be based on an overbroad reading of Gertz. ¶ 25 Since the publication of the Restatement (Second) of Torts in 1977, some uncertainty has arisen as to the applicability of Gertz for defamation actions brought in a purely private context. Roughly a decade after Gertz, the Supreme Court in Dun & Bradstreet, Inc. v. Greenmoss Builders, Inc. ruled by plurality opinion that a private plaintiff's recovery of presumed and punitive damages in defamation cases absent a showing of `actual malice' does not violate the First Amendment when the defamatory statements do not involve matters of public concern. 472 U.S. 749, 763, 105 S.Ct. 2939, 86 L.Ed.2d 593 (1985); id. at 763-64, 105 S.Ct. 2939 (Burger, C.J., concurring); id. at 774, 105 S.Ct. 2939 (White, J., concurring). A four-justice dissent criticized the plurality for failing to attribute any free speech interests to the statement, and it would have applied Gertz to require the private plaintiff to show negligence to establish the defamatory claim and actual malice to receive presumed or punitive damages. Id. at 775-76, 105 S.Ct. 2939 (Brennan, J., dissenting). In Cox v. Hatch , this court noted the impact of this plurality decision: If the defamatory falsehood does not relate to a matter of `public concern,' state law could constitutionally continue to apply the common law doctrine of strict liability in a defamation action. 761 P.2d 556, 559-60 (Utah 1988). But Cox left open the question of Gertz's applicability in the purely private context. See id. at 560-61 (finding a public concern and resolving the case where plaintiff failed to state a claim). ¶ 26 Again, we leave open this question regarding strict liability in a purely private defamation action. Although this issue could be implied from the assumption in the Restatement (Second) of Torts that Gertz eliminated strict liability in all defamation actions, that question is not before us and we need not rely solely on that reasoning. Rather, we are faced with a question regarding the abuse of a conditional privilege. Though this privilege may not present the panoply of First Amendment interests of a constitutional privilege, it is a privilege that affords its publisher a level of protection in making certain statements to certain individuals. ¶ 27 A conditional privilege arises to protect a legitimate interest of the publisher, the recipient, or a third person. See Brehany, 812 P.2d at 58. The privilege also extends to statements made to advance a legitimate common interest between the publisher and the recipient of the publication. Id. Thus, [t]his qualified privilege protects an employer's communication ... to other interested parties concerning the reasons for an employee's discharge. Id. Were statements not so privileged, a chilling effect would harm legitimate interests, including those at stake here, in candor, lawyer representation, and fiduciary duties or responsibilities. The conditional privilege also permits mistakes to be made; otherwise, there would be no need for the privilege. See, e.g., id. (noting that a conditional privilege is regarded as being sufficiently important to justify some latitude for making mistakes (internal quotation marks omitted)). And while we recognize that, [a]t its core, an action for defamation is intended to protect an individual's interest in maintaining a good reputation, West v. Thomson Newspapers, 872 P.2d 999, 1008 (Utah 1994), the reality of the privilege means defamatory statements will be made for which an injured plaintiff will not be able to recover damages. Thus, in balancing the justification for the privilege against the individual's interests in reputation, the necessity of deeming certain statements privileged requires some room for honest error, but not for known falsity or recklessness. ¶ 28 Accordingly, we abandon the lack-of-reasonable-grounds standard. We now clarify that in addition to other common law means, such as excessive publication or common law malice, a plaintiff can show abuse of a conditional privilege where the defendant (1) made a defamatory statement knowing it to be false or (2) acted in reckless disregard as to its falsity. With the standards for abuse clarified, we turn to the evidence presented at trial.
¶ 29 To prove abuse of the privilege, the trial court correctly required Mr. Ferguson to present sufficient evidence that Defendants knew the statement to UMIA was false or acted with reckless disregard as to its falsity. This Mr. Ferguson did not do. [6] ¶ 30 A publisher's knowledge of the falsity of a statement is inherently subjective. To prove knowledge of falsity, a plaintiff must present evidence that shows the defendant knows the defamatory statement is untrue. Likewise, acting with reckless disregard as to the statement's falsity involves a showing of subjective intent or state of mind. The Restatement explains that reckless disregard as to falsity exists when there is a high degree of awareness of probable falsity or serious doubt as to the truth of the statement. Restatement (Second) of Torts § 600 cmt. b (1977); see also St. Amant v. Thompson, 390 U.S. 727, 731, 88 S.Ct. 1323, 20 L.Ed.2d 262 (1968) (There must be sufficient evidence to permit the conclusion that the defendant in fact entertained serious doubts as to the truth of his publication.). But while reckless disregard is substantially subjective, certain facts may show, regardless of the publisher's bald assertions of belief, that the publisher's allegations are so inherently improbable that only a reckless man would have put them in circulation or that there are obvious reasons to doubt the veracity of the informant or the accuracy of his reports. St. Amant, 390 U.S. at 732, 88 S.Ct. 1323. Therefore, reckless disregard as to the falsity of statement that a defendant honestly believed to be true is determined by a subjective inquiry as to the defendant's belief and an objective inquiry as the inherent improbability of or obvious doubt created by the facts. [7] ¶ 31 Here, Mr. Ferguson presented no evidence to meet the standard. Rather, the evidence presented in his case in chief revealed that Defendants believed the truth of their statement concerning Mr. Ferguson's billing. Defendants' suspicions arose when, early in the year, Mr. Ferguson began to bill more hours than he ever had before; he outbilled the firm's traditional highest-billing attorneys and did so with out any apparent change in his work habits. Had Defendants made the statement to UMIA at this point, the conclusion might be that despite their suspicions, Defendants entertained serious doubts given that they knew of Mr. Ferguson's upcoming vacations. But Defendants did not do this; instead, to determine the validity of Mr. Ferguson's billing practices, Defendants used three sources of information: the computer tracking program, Mr. Ferguson's calendar, and the legal descriptions from his billing statements. Together, these sources revealed what Defendants believed to be improper billing practices by Mr. Ferguson. With this belief, Defendants, acting pursuant to their conditional privilege, made the statement to UMIA. ¶ 32 In response to this evidence, Mr. Ferguson offered his own testimony that when he was terminated and told of the reason why, he informed Defendants that he did not overbill. Mr. Ferguson also attacked the reasonableness of Defendants' investigation, pointing out that: the computer program failed to take into account legitimate billable work done away from the desktop computer; the investigating partners failed to confront Mr. Ferguson about the overbilling until after they made the statement to UMIA; Defendants could not point to any specific incident of overbilling; and UMIA's claim manager, Mr. Glenn, never found anything unusual about the billing. ¶ 33 While there may be questions about the adequacy of Defendants' investigation and what, in hindsight, may appear to have been a premature and possibly even erroneous conclusion, the evidence does not satisfy the standard of abuse required for the conditional privilege. Neither Mr. Ferguson's own testimony nor his evidence of an inadequate investigation show that Defendants made the statement to UMIA knowing it was false or that they acted with reckless disregard as to its falsity. The evidence does not show that Defendants entertained serious doubts of the statement's falsity or that they had a high degree of awareness of its falsity; rather, based on the three sources of information, Defendants made the statement believing it to be true. The fact that Defendants refunded $10,000 in fees to UMIA bolsters this conclusion. Nor does the evidence present facts that show the statement was inherently improbable or that an obvious reason existed to doubt the veracity of the statement. We therefore hold that the trial court properly granted Defendants' motion for directed verdict as to the defamation claim.