Noonan v. Staples: Jury Decides Against Plaintiff in Truth + Malice Internet Defamation Case
Digital media law update: On October 8, 2009 a jury returned a verdict based in a case in which an employee claimed that he had been defamed by an email broadcast that contained truthful accusations against him. Massachusetts is one of a handful of states that permits a plaintiff to bring a defamation suit regarding truthful statements made by a defendant -- if those statements were made with actual malice.
The Noonan case
The case is Noonan v. Staples, Inc., D.C. Mass, No. 06-10716. In 2005, Staples, the well-known office supply chain, conducted an audit of the expense reports of 65 employees, including Noonan, a traveling salesman. The auditors discovered a May 2005 expense report in which Noonan had requested $1,622 in reimbursements above what he actually spent. A subsequent audit of other reports he submitted uncovered more errors -- some in Noonan's favor and some in Staples' favor. Nevertheless, based on its findings, the audit team concluded that Noonan had falsified his expense reports. As a result, Staples fired him.
Staples also sent an email to all employees in the division where Noonan was employed -- approximately 1,500 people -- that stated:
"It is with sincere regret that I must inform you of the termination of Alan Noonan's employment with Staples. A thorough investigation determined that Alan was not in compliance with our [travel and expenses] policies. As always, our policies are consistently applied to everyone and compliance is mandatory on everyone's part. It is incumbent on all managers to understand Staple'[s] policies and to consistently communicate, educate and monitor compliance every single day. Compliance with company policies is not subject to personal discretion and is not optional. In addition to ensuring compliance, the approver's responsibility to monitor and question is a critical factor in effective management of this and all policies.
If you have any questions about Staple['s] policies or Code of Ethics, call the Ethics Hotline . . . or ask your human resources manager."
In addition, because he was being fired for cause, Staples refused to permit Noonan to exercise options to purchase almost 24,000 shares of stock (apparently worth a lot of money), and denied him any severance benefits.
Noonan sued Staples for libel and other causes of action relating Staples' actions against him. A cause of action for libel in Massachusetts, like most States, requires that a plaintiff show that (1) the defendant published a written statement, (2) concerning the plaintiff, that was both (3) defamatory, and (4) false, and (5) either caused economic loss or is actionable without economic loss. Stanton v. Metro Corp., 438 F.3d 119, 124 (1st Cir. 2006). Staples brought a motion for summary judgment on the libel claim, arguing that the evidence clearly established that Noonan had violated Staple's travel and expense policy, and that the email was consequently true and no libel action could lie. The District Court granted the motion.
On appeal, the 1st Circuit agreed that there was no triable issue of fact as to whether the email was true. However, the Justices noted that under Massachusetts law, "even a true statement can form the basis of a libel action if the plaintiff proves that the defendant acted with 'actual malice.'" Mass. Gen. Laws. ch. 231, § 92. Under modern defamation law, a plaintiff is often permitted establish malice by showing that the defendant made the defamatory statement with knowledge that it was false, or with reckless disregard for whether it was false or not. However, for the purposes of truth + malice defamation, the 1st Circuit held that the older meaning for malice -- hatred or ill will toward the plaintiff -- was required.
The 1st Circuit concluded that there was evidence from which a jury could conclude that Staples acted with ill will toward Noonan. For example, in writing the email, Staples broke its long-standing policy against referring to a fired employee by name in a mass communication. From this evidence, a jury could conclude the Staples' real goal was to humiliate Noonan. Staples also had no need to send the email to a 1,500 persons in the division, since many of these employees did not travel and had no reason to be advised of Staples' travel policy. Accordingly. The 1st Circuit remanded the case back to the District Court for a jury trial on whether Staples acted with malice.
Unfortunately for Noonan, on October 8, 2009, the jury returned a verdict in favor of Staples, apparently concluding the Staples had not acted with malice after all.
Truth + malice defamation v. publication of private facts
After the 1st Circuit ruling in this matter, Staples had attempted to avoid trial by arguing that truth + malice defamation was unconstitutional. Staples was correct that the U.S. Supreme Court has ruled that under the 1st Amendment truth is a mandatory defense for defamation cases by public persons or concerning matters of public concern. See New York Times Co. v. Sullivan, 376 U.S. 254 (1964). However, the Supreme Court has left the defense of truth unsettled "in the discrete area of private libels." The Florida Star v. B.F.J., 491 U.S. 524, 532 (1988). The District Court denied Staples' motion on this issue.
A truth + malice defamation claim effectively is a privacy tort and has much in common with the well-known privacy tort "publication of private facts." As in a "publication of private facts" claim, most true but defamatory statements are likely to disclose private information about a person. Because of the similarity between the two types of torts, the Restatement, Second, Torts, a very influential legal treatise, advised jettisoning malice + defamation claims entirely, and solely recognizing a "publication of private facts" tort. See Restatement, Second, Torts at §§ 581, 652D.
However, the two torts do not cover all of the same circumstances. On one hand, the definition of "privacy" as used in cases dealing with "disclosure of private facts" is broader than the definition of "defamation." On the other hand, to establish a defamation claim, the plaintiff only has to show that the defamatory statements were made to one individual. Publicity torts require a showing that the private facts were published to the world at large, or to a large number of people. So jettisoning true + malice defamation would leave a plaintiff without a right of recovery where a defamatory statement was made to a small group of people but still caused the plaintiff great harm.
In an example given in the Restatement, if "A, a creditor, writes a letter to the employer of B, his debtor, informing him that B owes the debt and will not pay it. This is not an invasion of B's privacy" and not actionable as a disclosure of private facts tort. On the other hand, A's letter might be actionable as a true but malicious defamation tort -- in the states that recognize this species of defamation.
Given the different scope of the two torts, it often makes sense to plead both torts as possible theories of relief in a complaint regarding a harmful disclosure of private information. If you have any questions regarding defamation, whether on the Internet or elsewhere, please feel free to contact me.
David D. Johnson is a business lawyer whose practice focuses on litigation and other issues relating to digital media and consumer electronics companies. David can be contacted at (310) 785-5371 or DJohnson@jmbm.com.
