Noonan v. Staples, Inc. , 539 F.3d 1 ( 2009 )

United States Court of Appeals
For the First Circuit
No. 07-2159
ALAN S. NOONAN,
Plaintiff, Appellant,
v.
STAPLES, INC.,
Defendant, Appellee.
APPEAL FROM THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF MASSACHUSETTS
[Hon. Morris E. Lasker, U.S. District Judge]
Before
Torruella, Wallace,* and Lipez,
Circuit Judges.
Wendy Sibbison, with whom Richard M. Gelb, Stamenia
Tzouganatos, Daniel K. Gelb, and Gelb & Gelb LLP, were on brief for
appellant.
Ariel D. Cudkowicz, with whom Krista Green Pratt and Seyfarth
Shaw LLP, were on brief for appellee.
February 13, 2009
*
Of the Ninth Circuit, sitting by designation.
TORRUELLA, Circuit Judge. Alan S. Noonan was fired from
his job as a salesman at Staples, Inc. for allegedly padding
expense reports. A Staples executive then sent a mass e-mail to
about 1,500 employees informing them that Noonan had been fired for
violating the company's travel and expense policy. Staples also
denied Noonan his severance benefits and refused to allow him to
exercise his stock options, claiming that, under the terms of the
agreements setting forth the right to these benefits, Noonan was
ineligible because he had been fired "for cause." Noonan sued
Staples in Massachusetts court for libel and breach of those
agreements, and Staples removed to federal court. Both parties
moved for summary judgment, the district court granted summary
judgment in favor of Staples, and Noonan now appeals.
We initially affirmed the grant of summary judgment.
Noonan v. Staples, Inc., 539 F.3d 1 (1st Cir. 2008). But, on panel
rehearing, we withdraw our prior opinion and issue this opinion in
which we affirm in part, reverse in part, and remand.
I. Background
Because this case comes to us on appeal from summary
judgment, we relate the relevant facts in the light that most
favors the nonmovant, Noonan. Franceschi v. U.S. Dep't of Veterans
Affairs, 514 F.3d 81, 83 (1st Cir. 2008). Noonan was a Staples
sales director who did much traveling for business and had to
compile expense reports to be reimbursed for travel, food, and
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other business-related expenses. Staples had a travel and expense
policy requiring employees to submit receipts for all expenses over
$75, and for all meals regardless of price; to use their corporate
credit card for business expenses instead of their personal credit
card; and to book all work-related travel through Staples's travel
department. Noonan claims, with support in the record, that these
directives were irregularly enforced and often not followed by many
employees.
In November 2005, Staples discovered that an employee
named James Dorman had been embezzling money from the company
through fraudulent expense claims and fired him. It then undertook
an audit of expense reports based on a sample of sixty-five
traveling employees in the North American Division, including
Noonan. Auditors investigating Noonan discovered a May 2005
expense report in which he had requested $1,622 in excess of what
he had actually spent. The team also found that Noonan had used
his personal credit card for many of these purchases, had booked
the travel through a non-company travel agent, and had failed to
submit all the required receipts.
These anomalies led Staples to assemble a special team,
composed of certified accountants and a former police investigator,
to look further into Noonan's past expense reports. Noonan
admitted to the team that he often "pre-populated" his reports
before a given trip -- that is, he estimated what his expenses
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would be in advance, and submitted the report with these estimates,
but with (Noonan claims) the intention to amend the report later to
the extent the actual expenses differed from the estimates. The
team found that Noonan had failed to enter such adjustments on a
number of expense reports and discovered other anomalies, such as
entries where the amount claimed was exactly $100 more than what
the item actually cost, and entries where decimal points had been
shifted two places to the right (resulting, for example, in an
$1,129 meal at an airport McDonald's, instead of $11.29). Noonan
also committed errors in Staples's favor. When the team asked him
about the large amounts of extra money that had been deposited into
his checking account, Noonan responded that he had not noticed.
Based on its findings, the team unanimously concluded
that Noonan had deliberately falsified the audited expense reports
and, as a result, Staples fired him. It sent him a letter stating
that he had been terminated "for cause" for violating the travel
and expense policy and the company's Code of Ethics, and that he
was consequently ineligible for severance benefits. The following
day, Executive Vice-President Jay Baitler sent an e-mail to all the
employees in Staples's North American Division, a group whose
precise number is unknown and disputed, but that totaled somewhere
around 1,500 people. The e-mail stated as follows:
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
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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
Staples['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 Staples['s]
policies or Code of Ethics, call the Ethics
Hotline . . . or ask your human resources
manager.
Over the course of Noonan's employment, he and Staples
entered into two stock-option agreements, dating respectively from
1992 and 2004 (respectively, the "1992 Stock-Option Agreement" and
the "2004 Stock-Option Agreement"). The pertinent language in the
1992 Stock-Option Agreement provided as follows:
[I]f [Noonan's] relationship with Staples is
terminated by Staples for "cause" (as defined
below) . . . the right to exercise this option
with respect to any shares not previously
exercised shall terminate immediately . . . .
"Cause" shall mean willful misconduct by
[Noonan] or willful failure to perform his or
her responsibilities in the best interests of
Staples (including, without limitation, breach
by [Noonan] of any provision of any
employment, consulting, advisory,
nondisclosure, non-competition or other
similar agreement between [Noonan] and
Staples), as determined by Staples, which
determination shall be conclusive.
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(Emphasis added.) The 2004 Stock-Option Agreement contained this
language, and added other grounds constituting "cause," including
"violation by [Noonan] of the Code of Ethics or an attempt by
[Noonan] to secure any improper personal profit in connection with
the business of Staples."
Six days before being fired, Noonan sent Staples a
$290,714.40 check and notified it that he was exercising his vested
right to purchase 23,825 shares of stock -- 22,700 governed by the
1992 Stock-Option Agreement, and 1,125 governed by the 2004 Stock-
Option Agreement. Staples returned the check uncashed, noting that
the investigation into Noonan's expense-reporting practices was
ongoing, and that if Staples ultimately terminated him for cause,
he would not be entitled to gains on the shares. Staples did not
ultimately allow Noonan to exercise the stock options.
Noonan also had a severance agreement with Staples which
stated that Staples would not be required to pay benefits if Noonan
was terminated "for '[c]ause'" -- that is, if Noonan "wilfully
fail[ed] to substantially perform [his] duties with Staples,"
"violate[d] the Code of Ethics or attempt[ed] to secure any
improper personal profit," or "engage[d] in misconduct which is
demonstrably and materially injurious to Staples . . . ." On these
grounds, Staples did not give Noonan severance benefits.
Noonan, a Florida resident, filed suit in Massachusetts
state court; Staples, a Massachusetts corporation, removed to the
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U.S. District Court for the District of Massachusetts. Noonan's
complaint alleged (1) libel based on the Baitler e-mail; (2) breach
of the two stock-option agreements; and (3) breach of the severance
agreement.1 Noonan moved for summary judgment on a portion of the
libel claim and on the claim alleging breach of the stock-option
agreements; Staples filed a cross-motion for summary judgment on
all counts in the complaint. The district court granted summary
judgment on behalf of Staples. On the libel claim, the district
court determined that what was stated in the e-mail was true, and
that Noonan had presented no evidence of actual malice on the part
of Staples. On the breach-of-contract claims, the court found that
Noonan had been fired for cause and that, pursuant to the terms of
the agreements, he was therefore ineligible for the stock options
and benefits. Noonan now appeals.
II. Discussion
A. Standard of Review
We will affirm a district court's summary judgment where
"the pleadings, the discovery and disclosure materials on file, and
any affidavits show that there is no genuine issue as to any
material fact and that the movant is entitled to judgment as a
matter of law." Fed. R. Civ. P. 56(c). At summary judgment, the
court's task is not "'to weigh the evidence and determine the truth
1
Noonan made two other claims that were also dismissed by the
district court. He does not appeal those dismissals.
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of the matter but to determine whether there is a genuine issue for
trial.'" Asociación de Periodistas de P.R. v. Mueller, 529 F.3d
52, 55 (1st Cir. 2008) (quoting Anderson v. Liberty Lobby, Inc.,
477 U.S. 242, 250 (1986)). We accord plenary review to summary
judgment and view the record in the light most favorable to the
nonmovant, drawing reasonable inferences in his favor. Franceschi,
514 F.3d at 84.
B. Libel Claim
Noonan claims first that Staples committed actionable
libel against him through the sending of the Baitler e-mail. Under
Massachusetts law, a plaintiff alleging libel must ordinarily
establish five elements: (1) that the defendant published a
written statement; (2) of and concerning the plaintiff; that was
both (3) defamatory, and (4) false; and (5) either caused economic
loss, or is actionable without proof of economic loss.2 Stanton v.
Metro Corp., 438 F.3d 119, 124 (1st Cir. 2006) (citing White v.
Blue Cross & Blue Shield of Mass., Inc., 809 N.E.2d 1034, 1036
(Mass. 2004)); Mass. Sch. of Law at Andover, Inc. v. Am. Bar Ass'n,
142 F.3d 26, 42 (1st Cir. 2006) (quoting McAvoy v. Shufrin, 518
2
The parties do not dispute that the first element of Noonan's
libel claim, which "requires that the defendant communicate the
defamatory statement to a third party," White v. Blue Cross & Blue
Shield of Mass., Inc., 809 N.E.2d 1034, 1036 (Mass. 2004), was
satisfied by the sending of the Baitler e-mail to some 1,500
Staples employees. The parties likewise do not dispute that the
e-mail concerned the plaintiff, Noonan. Of the remaining three
elements, only the element of falsity has been challenged on
appeal.
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N.E.2d 513, 517 (Mass. 1988)). A statement is defamatory if it
"may reasonably be read as discrediting [the plaintiff] in the
minds of any considerable and respectable class of the community."
Disend v. Meadowbrook Sch., 604 N.E.2d 54, 55 (Mass. App. Ct. 1992)
(citing Sharratt v. Housing Innovations, Inc., 310 N.E.2d 343, 346
(Mass. 1974)); accord White, 809 N.E.2d at 1036. Generally, under
Massachusetts law, summary judgment for a libel defendant is
appropriate if "the publication is not reasonably capable of any
defamatory meaning, and cannot reasonably be understood in any
defamatory sense." Sharratt, 310 N.E.2d at 345 (quoting King v.
Ne. Publ'g Co., 2 N.E.2d 486, 487 (Mass. 1936)); see also Smith v.
Suburban Rests. Inc., 373 N.E.2d 215, 217 (Mass. 1978) ("Inferences
which might be drawn by a considerable and respectable segment of
the community can make a publication actionable."); Amtrak Prods.,
Inc. v. Morton, 410 F.3d 69, 72 (1st Cir. 2005) (in determining
whether statement was defamatory, courts ask what a "reasonable
reader" would think upon reading it) (quoting Foley v. Lowell Sun
Publ'g Co., 533 N.E.2d 196, 197 (Mass. 1989)).
Since a given statement, even if libelous, must also be
false to give rise to a cause of action, the defendant may assert
the statement's truth as an absolute defense to a libel claim.
Mass. Sch. of Law at Andover, 142 F.3d at 42 (citing Bander v.
Metro. Life Ins. Co., 47 N.E.2d 595, 598 (Mass. 1943)); McAvoy, 518
N.E.2d at 517. Massachusetts law, however, recognizes a narrow
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exception to this defense: the truth or falsity of the statement
is immaterial, and the libel action may proceed, if the plaintiff
can show that the defendant acted with "actual malice" in
publishing the statement. White, 809 N.E.2d at 1036 n.4 (citing
Mass. Gen. Laws ch. 231, § 92).
Noonan argued before the district court, and reiterates
before us, that Baitler's e-mail was both defamatory and false, and
thus constituted actionable libel. Staples countered that the
evidence clearly established that Noonan did indeed violate the
company's travel and expense policy, and that the e-mail was
consequently true and no libel action could lie. The district
court sided with Staples, concluding that Noonan's libel claim
could not proceed as a matter of law because the Baitler e-mail was
true: even when viewed in the light most favorable to Noonan, the
record demonstrates that he failed to comply with the policy. Our
review of the record and Massachusetts law leads us to the same
conclusion. Thus, there is no triable issue of fact on the
question of truth.
We focus first on Noonan's arguments concerning the
e-mail's falsity, because if the evidence corroborates Staples's
asserted defense that the e-mail's contents were true, then absent
actual malice on the part of Staples, the libel claim must be
dismissed regardless of whether the e-mail defamed Noonan. See id.
at 1036. Noonan does not seriously challenge that, on their face,
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all the sentences in the e-mail were true. As the e-mail states
and the record bears out, Staples did indeed commission an
investigation of Noonan's expense-reporting practices, and the
investigators determined that he was not in compliance with the
travel and expense policy. Even Noonan admits that he frequently
disregarded the letter of the policy, booking travel with non-
company travel agents, using his personal credit card instead of
the company card, and failing to turn in receipts. Whether, as
Noonan asserts, he actually saved Staples money -- through, for
example, buying cheaper plane tickets from online agents or
committing mathematical or typographical errors on his expense
reports in Staples's favor -- is immaterial.3 Whether, as Noonan
asserts, many other traveling employees also regularly disregarded
the policy is likewise irrelevant. Even taking these assertions as
accurate, they do not change the simple fact relayed in the e-mail,
and supported by the evidence in the record, that Staples fired
Noonan after an investigation determined him to be out of
compliance with the travel and expense policy.
Noonan urges us, however, to look beyond the letter of
the e-mail to the effect it must have had on its approximately
1,500 recipients. He argues that reasonable recipients could have
3
For this reason, we need not attempt to determine whose
calculations -- Noonan's or Staples's -- were correct, or whether
it was Noonan or Staples who received the ultimate windfall from
Noonan's typographical and mathematical errors.
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read other passages in the e-mail and, viewing the e-mail in its
totality, drawn the inference that he arrogantly regarded Staples's
policies as subject to his personal whim and committed some sort of
grave misconduct -- grave enough that Baitler himself departed from
company policy on employee privacy by referring to Noonan by name
in the e-mail. Indeed, according to Noonan, the e-mail's reference
to an "investigation," the recent experience with the firing and
later indictment of Dorman for stealing money from the company, and
the fact that Staples took the drastic step of terminating Noonan
instead of merely reprimanding him or delaying the relevant
reimbursements, could have led reasonable readers to conclude that
he, like Dorman, committed a crime. At the very least, the e-
mail's reference to the company Code of Ethics could have given
reasonable readers the impression that Noonan was terminated for
illegal or unethical conduct in the reporting of his travel
expenses. As support for these arguments, Noonan cites a number of
cases applying Massachusetts law and holding that, to determine
whether a given statement is defamatory, the court must look at it
as a whole and in the context in which it was published. See,
e.g., Stanton, 438 F.3d at 125, 128; Foley, 533 N.E.2d at 197
(court must examine statement "'in its totality in the context in
which it was uttered or published[,] . . . consider[ing] all the
words used, not merely a particular phrase or sentence'" (quoting
Myers v. Boston Magazine Co., 403 N.E.2d 376, 379 (Mass. 1980));
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Smith, 373 N.E.2d at 218; Sharratt, 310 N.E.2d at 346 ("attendant
circumstances may be shown as proof of the defamatory nature of the
words"); Disend, 604 N.E.2d at 55 ("Words not inherently
disparaging may . . . have that effect if viewed contextually,
i.e., in the light of attendant circumstances." (citing Sharratt,
310 N.E.2d at 346)).
Crucially, all of Noonan's cited cases concern how a
court determines whether a given statement is, or could be
understood as, defamatory,4 and not with the separate inquiry of
whether the statement is true or false. As noted above, the
impugned statement must be both defamatory and false for a libel
action to lie, and these are distinct elements. Without saying so
explicitly, Noonan is, in essence, asking us to import the corpus
of legal principles for determining a statement's defamatory nature
into the examination of the statement's truth or falsity. Noonan
wants us to adopt a rule whereby even an objectively true statement
can give rise to a libel claim if reasonable readers might infer
from it other, untrue characteristics of the plaintiff or conduct
by him.
4
Massachusetts courts engage in a similar inquiry when
determining the second element of a libel claim -- whether the
statement is of or concerning the plaintiff. See, e.g., Stanton,
438 F.3d at 128 ("Like the question of whether a communication can
reasonably be understood to be defamatory, whether a communication
can reasonably be understood to be of and concerning the plaintiff
depends on the circumstances." (citing New Eng. Tractor-Trailer of
Conn., Inc. v. Globe Newspaper Co., 480 N.E.2d 1005, 1010 n.5
(Mass. 1985))).
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Unfortunately for Noonan, our survey of the relevant
Massachusetts law has uncovered no clear support for this
interpretation, and we are reluctant to recognize such a
significant expansion in view of our limited role as a federal
court sitting under our diversity jurisdiction. See Gill v.
Gulfstream Park Racing Ass'n, Inc., 399 F.3d 391, 402 (1st Cir.
2005) ("A federal court sitting in diversity cannot be expected to
create new doctrines expanding state law."); A. Johnson & Co., Inc.
v. Aetna Cas. & Sur. Co., 933 F.2d 66, 73 n.10 (1st Cir. 1991)
(diversity plaintiff "cannot expect this court 'to torture state
law into strange configurations or precipitously to blaze new and
unprecedented jurisprudential trails'" (quoting Kotler v. Am.
Tobacco Co., 926 F.2d 1217, 1224 (1st Cir. 1990))). Instead, the
relevant Massachusetts cases reveal the truth-or-falsity inquiry to
be a much simpler one. Our review of the record in the light most
favorable to Noonan reveals no triable issue of fact because, as
Staples asserts, everything said in the e-mail was true -- or at
least substantially true -- and substantial truth is all that is
required.5 See Murphy v. Boston Herald, Inc., 865 N.E.2d 746, 754
(Mass. 2007); Jones v. Taibbi, 512 N.E.2d 260, 266 (Mass. 1987).6
5
Thus, even though Noonan may dispute whether the investigation
was, as the Baitler e-mail characterized it, "thorough," this minor
detail does not deprive the e-mail of its substantially true
character.
6
To the extent the brief discussion in Perry v. Hearst Corp., 334
F.2d 800, 801-02 (1st Cir. 1964), suggests a different outcome, we
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Given this holding, Noonan's only hope for keeping his
libel claim alive is to prove that Staples -- or other employees
responsible for composing and sending the e-mail -- acted with
actual malice. As noted above, 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; White, 809 N.E.2d at 1036 n.4;
Conroy v. Fall River Herald News Publ'g Co., 28 N.E.2d 729, 731-32
(Mass. 1940).7
The relevant statute, Mass. Gen. Laws ch. 231, § 92,
passed in 1902, does not define the term "actual malice."8 Noonan
argues that the term "actual malice" refers to actual malevolent
intent or ill will. Though we initially concluded otherwise, on
rehearing we now agree.
do not believe that such an outcome comports with Massachusetts law
as it stands today.
7
This exception to the truth defense is not constitutional when
applied to matters of public concern. Shaari v. Harvard Student
Agencies, Inc., 691 N.E.2d 925, 927 (Mass. 1998). In the rehearing
proceedings, Staples has suggested that this exception to the truth
defense may never be constitutional. But this argument is not
developed now and was not raised in the initial briefing.
Accordingly, we do not consider it at this time. See Johnson v.
Mahoney, 424 F.3d 83, 96 (1st Cir. 2005).
8
The statute provides, in its entirety: "The defendant in an
action for writing or for publishing a libel may introduce in
evidence the truth of the matter contained in the publication
charged as libelous; and the truth shall be a justification unless
actual malice is proved." Mass. Gen. Laws ch. 231, § 92.
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A 1903 case from the Massachusetts Supreme Judicial Court
explains that the term meant "malicious intention." Conner v.
Standard Publ'g Co., 67 N.E. 596, 598 (Mass. 1903). Since 1964,
however, the term "actual malice" has taken on a new meaning in
defamation cases involving public figures; in this context, a
person acts with "'actual malice'" when he acts "'with knowledge
that [a defamatory statement] was false or with reckless disregard
of whether it was false or not.'" Cantrell v. Forest City Publ'g
Co., 419 U.S. 245, 251 (1974) (alteration in original) (quoting New
York Times v. Sullivan, 376 U.S. 254, 280 (1964)). But, the
Supreme Court has explained that actual malice in the public-figure
context is different than "common-law malice" or "ill will," which
is sometimes required under state law. Id. at 251-52.
Though the Massachusetts statute at issue in this case
also uses the term "actual malice," we are persuaded that we should
not read that term as having the specialized meaning later
developed by the Supreme Court. We had initially reached a
different conclusion after considering Rotkiewicz v. Sadowsky, 730
N.E.2d 282 (Mass. 2000). In that public-figure case, the Supreme
Judicial Court stated that "[i]n the context of defamation, the
term 'actual malice' does not mean the defendant's dislike of,
hatred of, or ill will toward, the plaintiff," but rather whether
the defendant acted with knowledge of falsity or reckless disregard
for whether a statement was true or false. Id. at 289 (emphasis
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added). Based on this language, we had concluded that the public-
figure definition of actual malice applied throughout "the context
of defamation." See also Richard W. Bishop, 17A Mass. Practice §
43.6 n.5 (supporting this conclusion).
We now reject this conclusion for a number of reasons.
First, since the statute was passed before the development of the
modern definition of actual malice, it would not be consistent with
legislative intent to read it as applying a more modern definition.
See Sullivan v. Chief Justice for Admin. & Mgmt. of the Trial
Court, 858 N.E.2d 699, 708 (Mass. 2006) ("The object of all
statutory construction is to ascertain the true intent of the
Legislature from the words used." (quoting Champigny v.
Commonwealth, 661 N.E.2d 931, 933 (1996))).9 Since the Legislature
of 1902 could not have intended to apply the modern definition of
"actual malice," we will not apply it here, absent an explicit
contrary interpretation from the Supreme Judicial Court.
Rotkiewicz is not such precedent; it was a public-figure case and
was not interpreting Mass. Gen. Laws ch. 231, § 92. Rotkiewicz,
730 N.E.2d at 289.
Second, the legal context supports construing "actual
malice" as "ill will" or "malevolent intent." First, since the
9
Where necessary, we "render interpretations of state law by
using the same methods that the state court would use." National
Pharms., Inc. v. Feliciano-de-Melecio, 221 F.3d 235, 241 (1st Cir.
2000).
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statute deals not with public figures, but with defenses under
traditional tort law, it is more appropriate to use the traditional
tort law meaning of the term. Second, application of the modern
meaning would produce the odd result that there would only be
liability for true statements where the speaker acted with
knowledge or recklessness as to the statement's falsity. The
statute, however, was not likely meant only to apply to the rare
case where a defendant utters a true statement which he seriously
doubts or sincerely disbelieves. Finally, in the public-figure
context, the "actual malice" test applies to statements of public
concern, an area in which defamatory true statements are not
actionable at all. See Phila. Newspapers v. Hepps, 475 U.S. 767,
768-69 (1986) (limiting recovery for true statements). Thus,
applying this test in the case of true statements would be
incongruous, as the modern "actual malice" test does not normally
apply to true statements. See Seideman v. City of Newton, 895
N.E.2d 439, 444 (Mass. 2008) ("Courts must ascertain the intent of
a statute from all its parts and from the subject matter to which
it relates, and must interpret the statute so as to render the
legislation effective, consonant with sound reason and common
sense."). For all these reasons, we conclude that Mass. Gen. Laws
ch. 231, § 92 means "common-law malice" when it uses the term
"actual malice." See also Shaari v. Harvard Student Agencies,
Inc., No. CA 907810D, 1996 WL 1186873, at *9 (Mass. Super. Ct.
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July 19, 1996) ("To establish 'actual malice,' as that term is used
in § 92, plaintiff need only prove 'disinterested malevolence'
rather than 'knowing falsity' or 'reckless disregard for the truth
on the part of the defendants.'"), rev'd on other grounds by 691
N.E.2d 925 (Mass. 1998).10 Although we recognize that in exercising
our diversity jurisdiction we must tread lightly in offering
interpretations of state law where controlling precedent is scarce,
Gill, 399 F.3d at 402, we are also obliged to provide our "best
guess" as to open questions of state law when necessary. Liberty
Mutual Ins. Co. v. Metro. Life Ins. Co., 260 F.3d 54, 65 (1st Cir.
2001). In this case, we conclude that the relevant state
precedents and the traditional canons of statutory construction
dictate the interpretation provided above.
The district court concluded that there was no evidence
of actual malice. Viewing "actual malice" as "ill will," we
disagree. First, in Baitler's twelve years with the company, he
had never previously referred to a fired employee by name in an e-
mail or other mass communication. From this evidence, a jury could
permissibly infer that Baitler singled out Noonan in order to
10
This conclusion is also supported by another Massachusetts
Appeals Court case. In Mihalik, that court ruled that "the meaning
of 'actual malice' as used in [§ 92] plainly cannot be continued
with respect to public officers and public figures." Mihalik v.
Duprey, 417 N.E.2d 1238, 1242 (Mass. App. Ct. 1981). If "actual
malice" in § 92 meant the same as it does in the public figure
cases, the Mihalik court would not have needed to note the need for
a change, since the constitutional protection afforded by that
standard would already be in place.
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humiliate him. To be sure, Staples has offered a non-malicious
explanation. Baitler stated in his deposition that he considered
the e-mail naming Noonan to be important in effectively making the
point to his employees that they must comply with Staples's travel
and expense policies. But, a jury could nevertheless conclude that
Baitler's explanation for the deviation from policy was pretextual.
Cf. Brennan v. GTE Gov't Sys. Corp., 150 F.3d 21, 29 (1st Cir.
1998) (noting, in a discrimination case, that "[d]eviation from
established policy or practice may be evidence of pretext").11
Further, should the jury reject this explanation, such conclusion
might lend further support to an inference of malicious intent.
Cf. Reeves v. Sanderson Plumbing Prods., Inc., 530 U.S. 133, 147
(2000) (noting, in the discrimination context, that "[p]roof that
the defendant's explanation is unworthy of credence is simply one
form of circumstantial evidence that is probative of intentional
discrimination, and it may be quite persuasive"). Considering the
conflicting explanations evinced by the record, it is properly for
the jury to decide whether to credit Baitler's explanation or
instead to draw the competing inferences advanced by Noonan.
11
Cf. Havlik v. Johnson & Wales Univ., 509 F.3d 25, 33-34 (1st
Cir. 2007) (rejecting plaintiff's argument that malice was shown by
a decision, which deviated from prior practice, to identify
plaintiff in university crime alert, on the basis of the fact that
the identity of the suspect was not usually known in previous
cases). Unlike the defendant in Havlik, Staples has made no
showing that Noonan was not similarly situated to other previously
fired Staples employees.
-20-
Second, Baitler had supervised Dorman and had failed to
notice his misfeasance. Moreover, Baitler did not send around a
similar e-mail regarding Dorman's actions. Noonan explains that he
will argue to the jury that they should infer that Baitler singled
out Noonan to detract attention away from the Dorman scandal.
These facts, while speculative on their own, could provide
additional background to support Noonan's pretext argument.
Third, Baitler sent the e-mail to a list of 1500 or 1600
employees of Staples. Noonan contends that many individuals on
that list did not travel and so had no reason to be advised of the
travel policy. Noonan will thus ask the jury to infer that the e-
mail's excessive publication shows Baitler's, and thus Staples's,
malevolent desire to harm Noonan's reputation. Cf. Dragonas v.
Sch. Comm. of Melrose, 833 N.E.2d 679, 687-88 (Mass. App. Ct. 2005)
(explaining that "excessive publication" can show malice sufficient
to defeat a conditional privilege). The record is not clear as to
the identity and job description of each person who received the e-
mail.12 But even in its present state, the record permits, though
12
Noonan contends that Staples improperly deleted the original
electronic version of the e-mail despite Noonan's lawyer's written
request. According to Noonan, this deletion made it impossible to
determine exactly who was on the list and how many people the list
included. Noonan contends that the e-mail's deletion raises a
permissible inference that the destroyed evidence shows excessive
publication. We need not reach the issue of the destruction of the
e-mail at this time, since the summary judgment record already
establishes that the e-mail was widely distributed. As noted
above, whether that distribution was so wide as to show malice will
be a question for the jury.
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certainly does not require, a conclusion that publication was
excessive since the record does not establish that the wide
distribution was made only to those inside the "narrow group who
shared an interest in the communication." See Draghetti v.
Chmielewski, 626 N.E.2d 862, 867 (Mass. 1994). Thus, considering
the large number of recipients, a jury could find that Baitler
published the e-mail excessively.
In this case, the presence of these three pieces of
evidence support inferences upon which a jury could base a verdict
for Noonan. In this case, where "motive and intent play a leading
role, summary judgment should not be granted" since Noonan
presented evidence beyond conclusory allegations or mere
speculation. Barss v. Tosches, 785 F.2d 20, 22 (1st Cir. 1986)
(affirming summary judgment as plaintiff rested on "the mere
allegation of an illegal motive found in the complaint, and
reiterated in an affidavit"); see also Aponte-Santiago v.
López-Rivera, 957 F.2d 40, 41 (1st Cir. 1992) ("The summary
judgment standard 'remains particularly rigorous when the disputed
issue turns on a question of motive or intent.'" (quoting Lipsett
v. University of Puerto Rico, 864 F.2d 881, 895 (1st Cir. 1988))).
Of course, "after the full presentation of the evidence at trial,
a factfinder might very well decide differently," but Noonan "has
raised a genuine issue of material fact as to the actual reason"
for publication of the e-mail, sufficient to defeat summary
-22-
judgment. Santiago-Ramos v. Centennial P.R. Wireless Corp., 217
F.3d 46, 57 (1st Cir. 2000).
Staples also contends that a conditional privilege
applies to protect Baitler's statements. A privilege does protect
statements "'reasonably related to the employer's legitimate
business interest.'" Sklar v. Beth Israel Deaconess Med. Ctr., 797
N.E.2d 381, 388 (Mass. App. Ct. 2003) (quoting Foley v. Polaroid
Corp., 508 N.E.2d 72, 79 (Mass. 1987)). But, this conditional
privilege is also defeated by a showing of malice. Dragonas, 833
N.E.2d at 687 (defining malice in this context to be a "base
ulterior motive," and including "intention to injure another").
So, if the jury finds actual malice sufficient to defeat the
statutory truth defense, the conditional privilege would also be
vitiated.
C. Breach of Stock-Option Agreements
Noonan next argues that the district court erred in
granting summary judgment to Staples on his claim that the latter
breached the two stock-option agreements by not allowing him to
exercise his options. The district court noted the language in the
agreements providing that Noonan was ineligible for the stock
options if Staples determined that his termination was "for cause,"
and dismissed the claim because "Staples's classification of
[Noonan's] actions as willful misconduct appears reasonable and
applicable in the circumstances."
-23-
As an initial matter, we must ascertain the correct
rubric through which to evaluate Noonan's assertion that he did
not, in fact, engage in willful misconduct or any other activity
that would qualify as cause for his firing. Staples contends that
we are prohibited from reaching the merits of this question, as the
stock-option agreements entrust the decision on what constitutes
"cause" to Staples, and Staples alone. It argues that several
courts have held similar clauses to be a valid limitation on
contractual remedies. See, e.g., McIntyre v. Phila. Suburban
Corp., 90 F. Supp. 2d 596, 600 (E.D. Pa. 2000); Stemerman v.
Ackerman, 184 A.2d 28, 33 (Del. Ch. 1962). Noonan, by contrast,
urges us to declare the relevant clauses in the agreements invalid
because they violate public policy, because they allow Staples to
be the judge in its own case. See, e.g., Ellis v. Emhart Mfg. Co.,
191 A.2d 546, 549 (Conn. 1963) (clause in stock-option agreement
violated public policy by providing that board of directors'
interpretation was final and conclusive) (citing, inter alia,
Patton v. Babson's Statistical Org., Inc., 156 N.E. 534, 536 (Mass.
1927)). Noonan invites us instead to engage in de novo review of
whether there was cause to fire him. For the reasons explained
below, the weight of authority pushes us onto a middle course
between these two extremes.
The question we must answer is whether Staples's
contractual prerogative to determine what constitutes "cause" is
-24-
unreviewable. If so, the matter ends there and we need not look at
the evidence to determine whether cause did indeed exist for firing
Noonan, because Staples undisputably determined that it did.
Unlike the inquiry into an alleged libel's truth or falsity
discussed above -- which Massachusetts courts have addressed -- our
survey of Massachusetts law reveals no pronouncement by that
state's courts on this precise question. Since this case rests on
diversity jurisdiction, we must attempt to divine how the
Massachusetts courts, and in particular the Supreme Judicial Court,
would answer the question if faced squarely with it. See Hardy v.
Loon Mt. Recreation Corp., 276 F.3d 18, 20 (1st Cir. 2002); accord
Liberty Mutual, 260 F.3d at 65 ("Absent a decision by the state's
highest court, we are free to make our own best guess as to
Massachusetts law . . . ."). In coming up with our "best guess,"
we may look to analogous decisions from other jurisdictions.
Hardy, 276 F.3d at 20 (citing Stratford Sch. Dist., S.A.U. #58 v.
Employers Reins. Corp., 162 F.3d 718, 720 (1st Cir. 1998)); see
also Vigortone AG Prods., Inc. v. PM AG Prods., Inc., 316 F.3d 641,
644 (7th Cir. 2002) (explaining that "the best guess is that the
state's highest court, should it ever be presented with the issues,
will line up with the majority of the states"). We may also find
guidance in pronouncements on similar matters by Massachusetts
courts.
-25-
Staples points us to what is probably the most closely
analogous published case of the handful that exist dealing with
this question, Weir v. Anaconda Co., 773 F.2d 1073 (10th Cir.
1985). In that case, Weir and his former employer, the Anaconda
Company, had a stock-option plan which gave an Anaconda
compensation committee the sole authority to determine whether Weir
had been fired for cause, and was thereby precluded from exercising
a stock option. Contrary to Staples's suggestion, however, the
Tenth Circuit did not hold that the compensation committee's cause
decision was unreviewable. Id. at 1078. Instead, according to
that court's reading of the applicable Kansas law, the committee's
decision should be treated in a manner similar to an agency
decision, and thus reviewed for whether it was arbitrary,
fraudulent, or made in bad faith. Id. at 1078-79. After
evaluating the evidence relating to Weir's firing in the light most
favorable to him, the court concluded that the committee's decision
suffered from none of these defects, and affirmed summary judgment
in favor of Anaconda. See id. at 1081-83. Importantly, the court
expressly rejected Weir's request that it apply, as Noonan implores
us to do here, a fully de novo standard of review to the
committee's decision. Id. at 1078.
Our survey of other jurisdictions has uncovered several
cases adopting similar standards of review. See, e.g., Scribner v.
Worldcom, Inc., 249 F.3d 902, 909 (9th Cir. 2001) (applying
-26-
Washington law, court reviews stock-option committee's
interpretation of plan's terms to determine whether it was made in
good faith); Craig v. Pillsbury Non-Qualified Pension Plan, 458
F.3d 748, 752 (8th Cir. 2006) (similar); W.R. Berkley Corp. v.
Hall, No. Civ.A. 03C-12-146WCC, 2005 WL 406348, at *4 (Del. Super.
Ct. Feb. 16, 2005) (unpublished) (when stock-option committee is
vested with final authority to determine rights under plan, court
will not second-guess its decision absent showing of fraud or bad
faith); Schwartz v. Century Circuit, Inc., 163 A.2d 793, 796 (Del.
Ch. 1960) (similar). These standards, and that propounded by the
Weir court, comport with the standard consistently used by
Massachusetts courts for determining whether a government official
acted properly in discharging another government employee. See,
e.g., Flomenbaum v. Commonwealth, 889 N.E.2d 423, 429 (Mass. 2008)
(arbitrary or capricious); Levy v. Acting Governor, 767 N.E.2d 66,
79 (Mass. 2002); McSweeney v. Town Manager of Lexington, 401 N.E.2d
113, 117 (Mass. 1980); cf., e.g., Madera v. Marsh USA, Inc., 426
F.3d 56, 63-64 (1st Cir. 2005) (where ERISA benefits plan gives
plan administrator or fiduciary discretionary authority to
determine employee's eligibility for benefits, the determination is
subject to an arbitrary and capricious standard of review, and the
decision must be upheld "'if there is any reasonable basis for it'"
(quoting Brigham v. Sun Life of Can., 317 F.3d 72, 81 (1st Cir.
2003)).
-27-
In view of this authority, our best prediction is that
the Massachusetts Supreme Judicial Court would hold that Staples's
"for cause" decision is not unreviewable, nor reviewable de novo,13
but instead that the courts may perform a limited review of the
decision to determine if it was arbitrary, capricious, or made in
bad faith.14 Even if we might disagree with Staples's action
regarding Noonan's firing, if Staples's decision was not arbitrary,
capricious, or made in bad faith, then we must accord it deference,
and consequently affirm the denial of Noonan's stock options under
the plain terms of the agreements. Cf., e.g., Mesnick v. Gen.
Elec. Co., 950 F.2d 816, 825 (1st Cir. 1991) (courts are not "super
personnel departments," and should not ordinarily second-guess
employers' business decisions). In performing this portion of the
inquiry, we adopt the definition of "cause" common to both stock-
13
Noonan claims that we are bound by the Patton case, in which the
Supreme Judicial Court held invalid a contractual clause giving a
company president the sole authority to determine whether a fired
employee would receive a deferred salary. See Patton, 156 N.E.
at 536. Yet Massachusetts courts strongly favor the freedom of
contract absent serious misconduct or fraud. See, e.g., Sound
Techniques, Inc. v. Hoffman, 737 N.E.2d 920, 927 (Mass. App. Ct.
2000). There is no evidence in the record that Noonan, a
sophisticated party, was under duress when he signed onto the
stock-option agreements, or that the agreements suffered from some
other infirmity invalidating their plain terms. In any event,
Patton dates from 1927, and we do not think the Court would take
the same view today when faced with a modern stock-option agreement
like the two at issue here.
14
At another point in its brief, Staples concedes that its cause
decision must have been made in good faith, and that we have the
authority to review the decision at least to that extent.
-28-
option agreements -- willful misconduct or willful failure to
perform responsibilities in the best interests of Staples -- a
definition which Noonan seems to accept as applicable here.
Cf. DiPietro v. Sipex Corp., 865 N.E.2d 1190, 1194 n.3 (Mass. App.
Ct. 2007) (applying definition of "for cause" as set forth in the
relevant agreement).
Noonan argues that, while he undoubtedly committed a
number of errors on the expense reports audited by Staples's
investigation team, these were merely the result of inadvertence or
carelessness, and not a willful attempt to defraud Staples. At the
very least, Noonan contends, the determination of whether his
conduct was willful involves looking into his state of mind, a
question ordinarily reserved for the jury. See Maimaron v.
Commonwealth, 865 N.E.2d 1098, 1109 (Mass. 2007). Again, however,
our task here -- and the jury's, if this claim were to survive
summary judgment -- is not to determine whether Noonan did indeed
act willfully, but whether Staples's assessment that he acted
willfully was arbitrary, capricious, or made in bad faith.
Notwithstanding a viewing of the evidence in Noonan's favor, we
hold that there is no material fact in dispute on this issue.
Noonan does not dispute that the team of investigators
was competent and experienced. The team looked at not just one or
two of his expense reports, but at thirty-seven, spread across
2005. It uncovered dozens of instances in which Noonan claimed
-29-
more than he was entitled to and determined unanimously that the
discrepancies must have been intentional. Our review of the record
reveals no material dispute of this fact. Even if, in fact, the
dozens of discrepancies were all the result of some extreme
sloppiness or inattentiveness on Noonan's part (as he rather
unblushingly contends), we discern no triable issue of fact on
whether the team -- and the Staples officers who reviewed and acted
upon the team's findings -- had a good-faith basis for concluding
that Noonan deliberately doctored these entries. For example, even
taking Noonan's $1,100 Big Mac as an honest keypadding slip (as
Noonan claims it was), the several entries showing the item claimed
as exactly $100 more than it actually cost are extremely damaging
to Noonan's case. The record reveals that the team found these to
refute his claim that the discrepancies were merely instances in
which he pre-populated the expense report (that is, he guessed at
how much the item would cost) and simply forgot to go back and
correct the entry later after he bought it and knew how much it
actually cost. Also damaging to Noonan's case, and taken into
account by the team, was his failure to notice (and his inability
to explain this failure to the investigators) the large amounts of
extra money being deposited into his account as a result of his
over-reimbursements.15
15
Another relevant factor is that Staples's termination letter to
Noonan told him that he was being fired for cause. See Hammond v.
T.J. Litle & Co., 82 F.3d 1166, 1175 (1st Cir. 1996) (applying
-30-
Therefore, regardless of whether Noonan also made errors
that, in the end, resulted in an ultimate windfall for Staples,16
the evidence viewed in Noonan's favor still shows highly suspicious
expense-reporting practices sufficient to ground a finding that
Noonan intentionally manipulated at least some expense reports so
that he would receive money he did not deserve. As Noonan
repeatedly argues or intimates, Staples may have been wiser to
conduct yet another, even more searching investigation into his
conduct; to give him a second chance before firing him; to impose
some less-severe form of discipline; or to punish other violators
in the North American Division -- of whom Noonan claims there were
many -- with the same harsh penalty. Nevertheless, even indulging
Noonan all reasonable inferences, we cannot say that Staples's
decision that Noonan engaged in willful misconduct or willfully
failed to perform his duties in its best interest -- based as it
was on the findings of experienced auditors -- was arbitrary,
capricious, or made in bad faith.
For these reasons, there is no triable issue of material
fact with respect to Staples's decision that cause existed to fire
Massachusetts law and remarking that "when an employee may only be
terminated for cause, whether the employer so informs the employee
plays a decisive role in a court's later determination of whether
the employee was discharged for cause").
16
As noted above, the parties vigorously dispute which party
received the ultimate windfall. We need not determine who is
correct on this question in order to resolve the issues presented
in this appeal. See supra note 3.
-31-
Noonan, and under the plain terms of the stock-option agreements,
Staples was thus entitled to determine Noonan ineligible for the
stock options. Accordingly, the district court did not err in
granting summary judgment to Staples on Noonan's claims concerning
the stock-option agreements, and we move on to his last ground of
appeal.
D. Breach of Severance Agreement
Lastly, Noonan contends that the district court erred in
granting summary judgment to Staples on his claim that it violated
the severance agreement. We need not dwell long on this ground of
appeal because it is foreclosed by the plain terms of the relevant
instruments. The severance agreement provided that Noonan would
not receive his severance benefits if Staples terminated him "for
'[c]ause.'" Another clause in the agreement provided that "cause,"
for purposes of the severance agreement, includes a violation of
Staples's Code of Ethics. The Code of Ethics, in turn, contained
the following provision:
We expect you to keep accurate records and
reports . . . . All company books, records,
and accounts must be maintained in accordance
with all applicable regulations and standards
and accurately reflect the transactions they
record. . . . We do not permit . . . false or
misleading entries in the company's books or
records for any reason. . . .
Even viewed in the light most favorable to Noonan, the
evidence in the record readily shows that he failed to abide by
-32-
this clause of the Code of Ethics.17 As Staples suggests, even if
all of Noonan's many expense-reporting discrepancies were simply
careless mistakes or instances where he forgot to amend
pre-populated entries after figuring out what the item actually
cost, the mere fact that he deliberately created inaccurate entries
through the practice of pre-population transgresses this provision.
Thus, under the plain terms of the severance agreement, Noonan was
fired for cause, as that term is specifically defined in that
agreement. See, e.g., Cabot Corp. v. AVX Corp., 863 N.E.2d
503, 513 (Mass. 2007) (where a contract's language is unambiguous,
its interpretation is a question of law that may be resolved on
summary judgment); Eigerman v. Putnam Invs., Inc., 877 N.E.2d 1258,
1263 (Mass. 2007) (courts interpret contracts according to plain
terms where these are unambiguous). The district court therefore
acted properly in determining that Noonan forfeited his entitlement
to severance benefits, and summary judgment in favor of Staples on
this claim must stand.18
17
The quoted language comes from the 2005 version of the Code of
Ethics. Noonan seems to argue that he was bound by the 2001
version of the Code; Staples asserts that he was bound by the 2005
version. We need not decide which party is correct, as the
relevant language in the 2001 version is identical.
18
We add that the 2004 Stock-Option Agreement (but not the 1992
Stock-Option Agreement) also included violation of the Code of
Ethics as a ground constituting "cause." Summary judgment in favor
of Staples with respect to that agreement could therefore have been
affirmed for this reason as an alternative to the ground discussed
above.
-33-
III. Conclusion
For the foregoing reasons, we affirm the district court's
grant of summary judgment in favor of Staples as to all counts
except Count I, the defamation count. As to this count, we reverse
and remand Noonan's claim for trial.
Affirmed in part, Reversed in part, and Remanded.
No costs awarded.
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