Court Opinion

ID: 65229
Source: CourtListenerOpinion
Date Created: 2010-04-26 05:48:35+00
Date Added: 2024-06-11T12:07:13.621084
License: Public Domain

IN THE UNITED STATES COURT OF APPEALS
                    FOR THE FIFTH CIRCUIT  United States Court of Appeals
                                                    Fifth Circuit

                                                 FILED
                                                                           March 20, 2009

                                     No. 08-50451                      Charles R. Fulbruge III
                                   Summary Calendar                            Clerk

KENDRICK J STODDARD

                                                   Plaintiff - Appellant
v.

WEST TELEMARKETING, L.P.; WEST BUSINESS SERVICES, L.P.

                                                   Defendants - Appellees

                   Appeal from the United States District Court
                for the Western District of Texas, El Paso Division
                                  No. 06-CV-259

Before KING, DENNIS, and OWEN, Circuit Judges.
PER CURIAM:*
       Following a jury verdict in his favor, Kendrick Stoddard appeals the
district court’s order granting West Telemarketing, L.P.’s renewed motion for
judgment as a matter of law on his libel claim. The district court granted the
motion because it concluded that Stoddard failed to produce any evidence that
the alleged defamatory statements were made with actual malice, a requirement

       *
         Pursuant to 5TH CIR . R. 47.5, the court has determined that this opinion should not
be published and is not precedent except under the limited circumstances set forth in 5TH CIR .
R. 47.5.4.
to overcome the employer’s qualified privilege for statements made in connection
with an employee investigation. For the reasons stated herein, we affirm.
             I. FACTUAL AND PROCEDURAL BACKGROUND
       Stoddard was employed by West Telemarketing, L.P. (“West”) as the site
director of West’s El Paso location. He was the highest ranking manager at this
location and had oversight of 1,200 employees.                  Based on an anonymous
employee complaint, West conducted an internal investigation regarding
allegations that Stoddard had participated in a sexually inappropriate lap dance
with a subordinate female employee in front of other West employees, that he
was having an affair with that employee, and that he had committed acts of
favoritism towards her. The investigation was performed by Kimberly Johnston,
who reported her findings to Norma Schmelling, West’s vice-president of
Employee Relations. Stoddard admitted to Johnston, and later testified at trial,
that the lap dance incident had occurred. He also agreed that the lap dance was
“inappropriate . . . and possibly should not have happened.” 1 After completing
her investigation, Johnston prepared a document entitled “Summary of
Findings” that addressed each allegation and proposed certain remedial actions.
Johnston recommended that disciplinary action be taken against Stoddard, but

       1
          Stoddard further stated: “I told [Johnston] that I didn’t think that the lap dances
were the best thing to do, that I think that I’ve learned a lesson from this experience, because
looking back, I can see how it could cause potential problems down the road. And basically,
I told her I wished it hadn’t happened.”

                                               2
she stopped short of proposing that he be terminated.2 Johnston testified that
she did not have the authority to recommend that an employee be terminated.
       After reviewing the factual findings in Johnston’s report, Schmelling made
an   independent       determination        that    Stoddard’s      actions    warranted       a
recommendation of termination.               Schmelling held a conference call with
Johnston and another member of the Employee Relations department to discuss
her decision to change the report’s recommendation. She testified that although
the final decision was hers to make, all three people on this conference call,
including Johnston, agreed to change the recommendation to termination.
Schmelling deleted all references in the report to Johnston’s proposed remedial
actions and replaced each with the single recommendation that Stoddard be
terminated. She did not, however, make any changes to Johnston’s findings of
fact. The report did not bear any indication that Schmelling had altered the
recommendation. Schmelling also added a new section to the report entitled
“Disciplinary Action for Kendrick Stoddard, DSO.” Although Stoddard argued
that this entire section served as the basis of his libel claim, his arguments
focused on the following paragraph:
             Through his actions, [Stoddard] has failed to follow and
       enforce West policy. He has also failed to hold his managers
       accountable for same. He has undermined his authority and shown
       extremely poor judgment by not only fraternizing with employees
       after hours but allowing sexually explicit actions (lap dancing by

       2
          Stoddard characterizes Johnston’s original report as more exonerating than it is. In
his brief, he claims that she recommended no disciplinary action be taken against him.
However, she wrote: “The potential liability that [Stoddard’s] actions have caused is serious
and it is Employee Relations opinion that these actions merit severe disciplinary action being
taken . . . [and] there are a multitude of direct examples of his lack of professional judgment.”
She concluded: “What I was able to confirm is that there is or was a serious concern with
[Stoddard’s] ability to demonstrate the level of professional judgment appropriate to his
position . . . I believe that it is still extremely important for West to formally address the
concerns with his professionalism.” While Stoddard is correct that Johnston did not
recommend termination, he is incorrect in asserting that she recommended that he not be
disciplined.

                                               3
      employees) to occur. The latter creates liability for the company as
      it could be perceived as contributing to a hostile work environment.
This challenged section concluded: “It is the recommendation of Employee
Relations that [Stoddard] be given a Step IV PIN, termination, for his lack of
professionalism and failure to follow company policy.”
      The amended version of the report was forwarded to Matt Driscoll, West’s
senior vice-president for client operations. After reviewing the report, Driscoll
decided to terminate Stoddard. Stoddard filed an internal appeal, which was
heard and denied by Schmelling. Stoddard then filed this suit, alleging racial
discrimination in connection with his termination under Title VII and alleging
defamation based on Schmelling’s amended version of the report.
      The jury returned a verdict in favor of West on the discrimination claim
and in favor of Stoddard on the libel claim. It awarded Stoddard $160,000 for
mental anguish, $250,000 for injury to his reputation, and $820,000 in punitive
damages.3 West then filed its renewed motion for judgment as a matter of law.
The district court granted the motion, finding that there was insufficient
evidence from which the jury could conclude that Schmelling’s statements were
made with actual malice. Stoddard appeals from the district court’s grant of this
motion and its final judgment dismissing his libel claim.
                                 II. DISCUSSION
      “After a case has been tried to a jury, a motion under Rule 50 [of the
Federal Rules of Civil Procedure] is a challenge to the legal sufficiency of the
evidence.” Travelers Cas. & Sur. Co. of Am. v. Ernst & Young LLP, 542 F.3d
475, 481 (5th Cir. 2008). We review the district court’s ruling on a Rule 50
motion de novo, applying the same standard as the district court. Id. Rule 50
allows the district court to grant a motion for judgment as matter of law “[i]f a

      3
          Stoddard admitted in the district court that punitive damages were statutorily
limited to $410,000 in this case.

                                           4
party has been fully heard on an issue during a jury trial and the court finds
that a reasonable jury would not have a legally sufficient evidentiary basis to
find for the party on that issue.” F ED. R. C IV. P. 50(a)(1). If the action is
submitted to the jury, a party may renew its motion for judgment as a matter of
law within ten days after entry of the judgment. F ED. R. C IV. P. 50(b). “[W]e
view all of the evidence in the light and with all reasonable inferences most
favorable to the party opposed to the motion.” Hagan v. Echostar Satellite,
L.L.C., 529 F.3d 617, 622 (5th Cir. 2008) (internal quotation marks and citation
omitted).
      “[A]n employer has a conditional or qualified privilege that attaches to
communications made in the course of an investigation following a report of
employee wrongdoing.” Randall’s Food Mkts., Inc. v. Johnson, 891 S.W.2d 640,
646 (Tex. 1995); see also Danawala v. Houston Lighting & Power Co., 14 F.3d
251, 254 (5th Cir. 1995). “[T]he law presumes good faith and want of malice
where the utterance is qualifiedly privileged.” Marathon Oil Co. v. Salazar, 682
S.W.2d 624, 630 (Tex. App.—Houston [1st Dist.] 1984, writ ref’d n.r.e.). In order
to overcome this privilege, the plaintiff must show that the statement was
“motivated by actual malice existing at the time of publication.” Randall’s, 891
S.W.2d at 646. “[A] statement is made with actual malice when the statement
is made with knowledge of its falsity or with reckless disregard as to its truth.”
Id. Although the burden of proving malice at trial is on the plaintiff, see Duffy
v. Leading Edge Prods., Inc., 44 F.3d 308, 314 (5th Cir. 1995), an employer may
establish the absence of malice “by conclusively proving that its employees had
reasonable grounds to believe that their statements were true,” Randall’s, 891
S.W.2d at 647; see also Duffy, 44 F.3d at 314 (“[T]he privilege is not lost if the
defendant actually believed the defamatory statement to be true.”).        When
attempting to prove actual malice, “[t]he focus is on [the person making the
statement’s] state of mind at the time of publication.” Danawala, 14 F.3d at 255.

                                        5
A combination of falsehood and general hostility is insufficient to show actual
malice. Id.
       Stoddard does not dispute Johnston’s factual findings. Indeed, he has
repeatedly admitted the lap dance incident occurred and testified that he
understood that it was inappropriate. His only challenge is to Schmelling’s
conclusion that his actions violated company policy, which he claims was false
and defamatory. In his brief, Stoddard goes to great lengths explaining how his
actions did not violate West’s policies. However, he provides scant argument
contradicting Schmelling’s testimony that she had a good faith belief that his
actions violated company policies.4
       He argues that a reasonable jury could have found that Schmelling knew
her accusation that he violated West’s policies was false or that she acted with
reckless indifference as to her statement’s truth because: (1) Schmelling was the
highest ranking employee in the Employee Relations department and had
worked at West for 12 years; (2) Johnston did not find that West’s policies had
been violated; (3) Schmelling had decided to recommend termination before the
investigation was complete; and (4) she made changes to Johnston’s report to
support her recommendation of termination and did not indicate that she had
made such changes on the face of the report.

       4
         As an example, Stoddard argues that his failure to report that the employee involved
in the lap dance had been arrested did not violate company policy because the policy states
that employees have a duty to inform the company of any arrest but does not explicitly place
the same burden on managers. Even if we assume that this action was not a violation of the
company’s policy, Stoddard does not provide any specific argument as to why Schmelling knew
this inaction was not a violation of the policy.
        Stoddard did, however, provide a specific argument regarding the lap dance incident.
He argues that Schmelling knew that this event did not violate West’s sexual harassment
policy because he and the women involved had previously discussed the incident with
Employee Relations and had not been reprimanded. The fact that he had not been previously
disciplined for the conduct does not mean that it did not violate the sexual harassment policy,
however, and is not evidence that Schmelling knew that he had not violated the policy.

                                              6
          Assuming arguendo, as did the district court, that Schmelling’s conclusion
that Stoddard’s actions violated company policies is false, we are not convinced
that a jury could have concluded that Schmelling acted with actual malice.
Nowhere in Stoddard’s evidence or arguments does he address Schmelling’s
state of mind at the time she wrote the report.
          First, Stoddard argues that given Schmelling’s 12-year tenure at West and
her position as the head of the Employee Relations department, a reasonable
jury could not believe that she was unaware of the company’s policies. He
combines this with the fact that Johnston, who conducted the original
investigation, did not specifically find that West’s policies had been violated and
did not recommend termination.            From this, Stoddard concludes that a
reasonable jury could find that Schmelling acted with knowledge that her
conclusion was false.
          However, while Johnston’s report did not state in so many words that
Stoddard violated West’s policies, neither did she state that Stoddard’s actions
accorded with the company’s policies. Johnston merely reported the facts from
her investigation, and, from these, Schmelling concluded that West’s policies had
been violated. If made in the good faith belief that her own conclusion was true,
Schmelling’s statements are protected by the privilege. Stoddard points to no
evidence or testimony suggesting that Schmelling did not hold such a good faith
belief.
          Stoddard secondly claims that Schmelling made the decision to terminate
him before receiving a complete report from Johnston and interprets this to
mean that she fabricated the conclusion that he violated company policy to
support her predetermined recommendation of termination. Stoddard cites to
the December 20, 2005 notes of an employee in the Employee Relations
department. These notes state that Schmelling recommended that Stoddard “be
let go.” Schmelling did not receive Johnston’s formal report until January 3,

                                           7
2006. In response, Schmelling testified at trial that she “probably” spoke with
Johnston about the investigation prior to December 20, 2005. Further, the final
entry in Johnston’s investigation notes was made on December 14, 2005, and no
new information was discovered between December 20, 2005, and January 3,
2006. Thus, even if Schmelling did not know the specifics of Johnston’s findings
prior to recommending that he “be let go,” the timing of this note alone does not
establish that she lacked a good faith belief that Stoddard’s actions violated
West’s policies at that time. Again, Stoddard shows no evidence related to
Schmelling’s state of mind to establish that she knew her conclusion was false.
      Finally, Stoddard argues that Schmelling made changes to Johnston’s
report to support her recommendation of termination and did not indicate that
she had made such changes on the face of the report.         To the extent that
Stoddard insinuates that Schmelling’s deletion of Johnston’s recommendations
is evidence of her lack of a good faith belief in her conclusion, this argument
lacks merit.   Johnston’s recommendations were all premised on Stoddard’s
continued employment at West.        When Schmelling made the decision to
recommend termination, deleting all recommendations based on his continued
employment was necessary. For example, it would not make sense for the report
to recommend his termination and also recommend that he receive extra
training and supervision. Thus, Schmelling made the deletions so that the
report would be coherent.      To the extent that Stoddard is arguing that
Schmelling’s failure to indicate in the final report that Johnston had not
originally recommended termination shows Schmelling’s lack of a good faith
belief in her statements, he is contradicted by the record. Schmelling testified
that the final recommendation represented the opinion of the entire Employee
Relations department and not Johnston specifically. Driscoll testified that he
viewed the report in this      manner.       Additionally, Johnston agreed with
Schmelling’s decision to recommend termination during the conference call.

                                         8
      Stoddard admitted to the principal facts of the investigation and cannot
challenge Schmelling’s recommendation that he be terminated as it is an opinion
and not a verifiable fact. Instead, he argues that Schmelling’s conclusion that
he violated company policy defamed him.               However, her statements are
protected by an employer’s qualified privilege, and Stoddard presented no
evidence to contradict Schmelling’s testimony that she held a good faith belief
that his actions violated West’s policies. Thus, the district court did not err in
finding that a reasonable jury could not have found that Schmelling acted with
actual malice in drafting the amended report.5
                                 III. CONCLUSION
      For the reasons stated above, we AFFIRM the district court’s judgment.

      5
       We do not need to reach Stoddard’s arguments regarding the jury’s award of punitive
damages because we affirm the district court’s final judgment in favor of West.

                                            9