Bargerstock v. Washington Greene Community Action Corp. , 397 Pa. Super. 403 ( 1990 )

DEL SOLE, Judge.

Ann Bargerstock, Appellee, was awarded $300,000 in compensatory and punitive damages against Washington-Greene Community Action Corporation (WGCAC) and John Wilson, Appellants, after a jury found that WGCAC and Wilson had defamed her and had violated her civil rights. WGCAC and Wilson appeal raising five issues. We reach the first three issues and reverse and remand for a new trial.

Bargerstock was employed as the manager of the transportation section of WGCAC, a non-profit organization engaged in community service activities including day care, head start centers and the transportation of elderly and low income people. Bargerstock was responsible for the receipt and deposit of monies collected from people who received transportation from the program. She was also responsible for monthly reports on the amount of money received and deposited. Carolyn Ross was Bargerstock’s secretary in this department.

From June, 1986, to September, 1986, no monthly reports were made by Bargerstock’s department to the fiscal office of WGCAC. The fiscal office was made up of John Patterson, fiscal supervisor and procurement officer, and August Stash, fiscal officer. After the third missing report, Stash notified Patterson. In August, 1986, Patterson notified Wilson, the executive director of WGCAC, that no money had been deposited in the transportation account for that month. Patterson also told Wilson that Bargerstock had told him that there were reports and money submitted for filing. Patterson continued to have problems in getting reports from Bargerstock’s department. Wilson told Patterson that if the problems persisted he should contact James Ealy, the operations manager and Bargerstock’s supervisor.

After the four missing monthly reports were submitted, Wilson, Patterson and Ealy discovered that the records did not conform to the bank records. Although deposit slips indicated that money had been deposited into the account, no money had actually been deposited. The bank which held the WGCAC account was of the opinion that the slips were forgeries. Stash, Wilson and Ealy met and determined that the only people who had access to the money involved in the transactions were Bargerstock and Ross. Wilson alerted the president of the WGCAC board of the situation and it was decided that meetings should be held with Bargerstock and Ross separately. If no one admitted guilt after the meetings then the matter would be turned over to the district attorney.

Separate meetings were held with Bargerstock and Ross on December 19, 1986. Present at the meetings were Joan Owens, deputy executive director of WGCAC, Stash and Ealy. At Ross’ meeting a union steward was also present since she was a union member. Neither Ross nor Bargerstock admitted responsibility for the missing funds. The matter was handed over to the district attorney and both women were suspended without pay. Ralph Eisiminger, an employee in Bargerstock’s department was told about the suspensions by Ealy. Within two months Ross was reinstated because Bargerstock had become the focus of the investigation.

Criminal charges were filed against Bargerstock. Soon after that, new evidence was discovered by the police which turned suspicion toward Ross and led to her confession. Charges were then dropped against Bargerstock and she was returned to her former position at her former rate of pay. Her suspension lasted four and one-half months. During this time, the local newspaper ran three small stories about the situation at WGCAC. The only article which mentioned Bargerstock’s name was an article about this defamation lawsuit.

In her complaint against WGCAC, Bargerstock alleged that she was defamed when WGCAC and Wilson told members of the police department that Bargerstock took the missing funds; told members of a “Pereinatal Task Force” that Bargerstock was guilty; told a PennDOT funding representative that Bargerstock was suspended because of a work-related impropriety; told various employees of WGCAC that Bargerstock was guilty and that Ross was suspended only as a formality; told newspaper reporters that two staff members were suspended in connection with a fiscal impropriety; and rehired Ross while Bargerstock remained suspended¹.

The first issue raised by WGCAC and Wilson has three parts. We will deal only with the third part which asks the question whether the trial court properly charged the jury on the defense of an affirmative privilege. We hold that it did not.

In an action for defamation, the plaintiff has the burden of proving:

(1) The defamatory character of the defamation;

(2) Its publication by the defendant;

(3) Its application to the plaintiff;

(4) The understanding by the recipient of its defamatory meaning;

(5) The understanding by the recipient of it as intended to be applied to the plaintiff;

(6) Special harm resulting to the plaintiff from its publication and, if applicable,

(7) Abuse of a conditionally privileged occasion.

42 Pa. C.S.A. § 8343(a)

A defendant may raise the defense that the communication was privileged and the burden is on the defendant to prove the “privileged character of the occasion on which it was published.” 42 Pa. C.S.A. § 8343(b).

Bargerstock alleged in her amended complaint that she was defamed by WGCAC and Wilson because of remarks made to the local newspaper, the district attorney, police officers, various employees and other people associated with WGCAC. These remarks were allegedly made after the December 19, 1986 meeting during which Bargerstock was initially confronted by members of the WGCAC board. WGCAC and Wilson requested from the trial court an instruction to the jury on the privileged nature of those remarks. The trial court gave the following instruction:

Now I am instructing you as a matter of law that the defendants were privileged to discuss and communicate certain comments, and those comments were the statements that took place at the meeting on the 19th in which Mr. Wilson, Mr. Stash, Mrs. Owens, Mrs. Bargerstock and the gentleman who was the accountant, who had testified that he had called Mrs. Bargerstock for reports. That meeting was, as a matter of law, a privileged conversation. The persons who were at that meeting had a right to be there because they were involved in a business decision and a business investigation. However, when those parties leave that meeting, then any action by any of them must be determined independent of that first meeting. Now that doesn’t mean that there still cannot be privileged communication or privileged statements made at a later date, but it means that each communication must be determined upon its own merit.

The testimony of Mr. Ealy who was also present at the meeting, according to the testimony of Mr. Eisiminger, that he communicated certain comments to Mr. Eisiminger. I believe, as a matter of law, that it was privileged that he would tell Mr. Eisiminger that he had new duties. I don’t think that is in dispute in this case. It is up to you to decide, based upon Mr. Eisiminger’s testimony and the weight you want to give to that testimony, whether or not Mr. Ealy abused any privilege he had and as a result defamed the plaintiff, Anne Bargerstock. That is one of the questions you must decide. Those are the instances in this case that I am holding as a matter of law that were either privileged communications or at least partially privileged communications. It is up to you to decide if there was an abuse of that communication.

(Jury Charge, 8/8/88-8/10/88, pp. 367-368.)

Whether a communication is conditionally privileged is a question for the court and whether that privilege is abused is a question for the jury. Montgomery v. Dennison, 363 Pa. 255, 69 A.2d 520 (1950). “A publication is conditionally privileged if the publisher reasonably believes that the recipient shares a common interest in the subject matter and is entitled to know____ This privilege applies to private communications among employers regarding discharge and discipline.” Daywalt v. Montgomery Hospital, 393 Pa.Super. 118, 573 A.2d 1116 (1990). A conditional privilege is abused if the plaintiff can show that the defendant acted with malice. Berg v. Consolidated Freightways, 280 Pa.Super. 495, 421 A.2d 831 (1980). The privilege can also be lost if the plaintiff can show that the defendant acted with negligence. Banas v. Matthews International, 348 Pa.Super. 464, 502 A.2d 637 (1985) This is a jury question that the jury cannot decide without proper guidance from the trial court.

A proper charge on conditionally privileged communications should begin with which communications the trial judge finds are privileged and which privilege they fall under. The judge should then instruct the jury that the privilege can be lost for each communication if the jury decides that the defendant abused the privilege. To find an abuse of the privilege, the jury has to find that the defendant made the defamatory communication intentionally, with the knowledge that it was false, recklessly, without regard to whether it was true or false, outside of the performance of the defendant’s duties which gave rise to the privilege, or that the defendant made a false statement without using reasonable care to determine the truth. (See Pennsylvania Selected Jury Instructions (Civil) § 13.09 Defamation: Defense of Privilege (1980)).

The jury charge given in the present case gives no guidance to the jury about what constitutes an abuse of a conditional privilege. The jury could not have possibly ascertained what a privileged communication is and how it can be abused from the charge that was given. Because of the inadequacy of the charge, we reverse the verdict and remand for a new trial.²

The second issue raised by WGCAC and Wilson is whether the trial court erred by failing to grant their post-trial motion for a judgment non obstante verdicto on Bargerstock’s 42 U.S.C.A. § 1983 action. We hold that the trial court did err.

Bargerstock alleged in her amended complaint that the actions of WGCAC and Wilson which made up her defamation count not only constituted state action but also damaged her reputation and her ability to pursue her profession. An action under § 1983 exists when a person, acting under color of state law, deprives a person of rights, privileges or immunities secured by the Constitution or laws of the United States. Parratt v. Taylor, 451 U.S. 527, 101 S.Ct. 1908, 68 L.Ed.2d 420 (1981). The United States Supreme Court has held that to establish a claim under § 1983, a person must allege more than simple defamation by a state officer. Paul v. Davis, 424 U.S. 693, 96 S.Ct. 1155, 47 L.Ed.2d 405 (1976). Beyond defamation, Bargerstock has alleged that the actions of WGCAC and Wilson have damaged her ability to pursue her profession. And yet, she has been reinstated in her old position with WGCAC at the same salary.³

On appeal from a denial of a motion n.o.v., this court must view all evidence in the light most favorable to the verdict winner. Kubacki v. Citizens Water of Washington, Pa., 403 Pa. 472, 170 A.2d 349 (1961). Even in viewing the evidence in the light most favorable to Bargerstock as verdict winner, we can find nothing that supports her § 1983 claim. Her alleged defamation at the hands of WGCAC and Wilson is not enough, according to the U.S. Supreme Court, and she produced no evidence at trial to support her claim that her ability to pursue her profession was damaged. Therefore, we reverse the verdict of the trial court and remand this claim as well.

The third issue raised by WGCAC and Wilson is whether the trial court’s charge on punitive damages was improper. We hold that it was. The trial court instructed the jury on punitive damages as follows:

Now in determining the matter of punitive damages or whether or not you will grant punitive damages, you may determine or must determine whether the conduct of the defendants was so outrageous that in addition to compensatory damages which you may have awarded Mrs. Bargerstock on her negligence action, that you wish to award additional monies in order to punish the defendant or defendants for their conduct, and the purpose of punishing a defendant in a case like this must be looked at as a punishment and not Mrs.’s Bargerstock’s rights to recover. Now if you want to punish a defendant or defendants in order to deter this type of activity from taking place in the future, or to send a message out that this type of conduct will not be tolerated, then and only then will you consider awarding punitive damages. Now I have stated twice that in order to award punitive damage (sic), the conduct must be outrageous. Now a person’s conduct is considered outrageous under the law when he acts with such a bad motive or when he acts with such reckless indifference as to the interest of another party and the actions committed by him, in this case defamation. If you wish and intend to award punitive damage (sic), then you must be able to show or to find that the defendant or defendants had a bad motive or that they acted with reckless indifference to the interest of Mrs. Bargerstock.

(Jury Charge, 8/8/88-8/10/88, p. 370)

The trial court’s instruction is proper as a general instruction on punitive damages for most tortious conduct. (See Pennsylvania Selected Jury Instructions (Civil) § 14.00 Punitive Damages — General Instructions (1980)). In defamation actions, however, punitive damages have required a different formulation. This court has noted that:

[bjecause punitive damages in defamation actions are in effect a punishment for speech, the formulation of the appropriate standard has been influenced by constitutional considerations. In Gertz v. Robert Welch, Inc., 418 U.S. 323, 349, 94 S.Ct. 2997, 3011, 41 L.Ed.2d 789 (1974), the United States Supreme Court held ‘[T]he 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.’ This is, of course, the familiar ‘actual malice’ formulation of New York Times v. Sullivan, 376 U.S. 254, 84 S.Ct. 710, 11 L.Ed.2d 686 (1964).

Geyer v. Steinbronn, 351 Pa.Super. 536, 559, 506 A.2d 901, 913 (1986). The Pennsylvania Supreme Court has held that in order to award punitive damages to a private party plaintiff in a defamation suit, a jury must conclude that there was clear and convincing evidence that the defendants) acted with “actual malice.” Hepps v. Philadelphia Newspapers, Inc., 506 Pa. 304 485 A.2d 374 (1984) reversed on other grounds, 475 U.S. 767, 106 S.Ct. 1558, 89 L.Ed.2d 783 (1986).

A proper instruction on punitive damages in a defamation action would begin with the judge explaining the “clear and convincing” standard to the jury and how it is a higher standard than the “preponderance of the evidence” test used in most civil cases. The judge should then instruct the jury on the meaning of the term “actual malice.” “Actual malice” means “that the defamatory publication was made either with knowledge that it was false or with reckless disregard of whether it was false.” Banas, 348 Pa.Super. at 470, 502 A.2d 637. If it is apparent to the trial judge that there is not clear and convincing evidence to support an award of punitive damages, the trial judge should withdraw the question from the jury’s consideration. See Hepps, 506 Pa. at 330-333, 485 A.2d 374.

The instruction given to the jury in the present case did not give a definition of “actual malice.” Therefore, we reverse and remand this case for a new trial on this count as well. Because we are reversing on the first three issues we do not reach the final two issues.

Reversed and remanded. Jurisdiction relinquished.

CAVANAUGH, J., files a concurring and dissenting opinion.

1 . As part of their appeal, WGCAC and Wilson question whether this final allegation by Bargerstock can actually be considered defamatory. That is, whether the action of rehiring Ross defamed Bargerstock and can support a claim against WGCAC and Wilson. We hold that it does not. Actions, like the dismissal of an innocent employee for theft, are capable of defamatory meaning and can sustain a cause of action when they are accompanied by verbal communication. Berg v. Consolidated Freightways, 280 Pa.Super. 495, 421 A.2d 831 (1980). Conduct directed at one party by another party can also sustain a cause of action for defamation. Bennett v. Norban, 396 Pa. 94, 151 A.2d 476 (1959). In Pennsylvania, however, conduct by a defendant directed at a third party has never been held to support a plaintiff’s cause of action for defamation. This may be because of the difficulty involved in proving a connection between the conduct of the defendant towards the third party and the harm caused to the plaintiff. In the present case, Bargerstock argues that the rehiring of Ross directly defamed her. We note, however, that Ross was a member of a union and that the union filed a grievance against WGCAC after Ross was suspended. Ross’ reinstatement came after that grievance was filed. (Notes of Testimony, 8/8/88, pp. 206-207). Bargerstock was not a union member. This illustrates the extenuating circumstances involved when we are asked to hold that conduct by the defendant directed towards a third party is actually defaming the plaintiff. Up to this point in time, Pennsylvania has limited defamation actions to communications and conduct directed by one party against another party. We see no reason to extend this cause of action based on the present case. It is only this final allegation against Wilson and WGCAC which does not support a cause of action. The rest of the allegations are not deficient.

2 . We also question how the trial court determined that the two occasions mentioned in its charge were privileged while concluding that other communications were not. A close reading of the trial transcript reveals that a number of the "publications” which Bargerstock alleged were defamatory involved the same information that was discussed at the meeting. This information was then given to employees and people associated with WGCAC who were affected by Bargerstock’s suspension.

3 . The dissent argues that Bargerstock’s § 1983 claim was based on the damages she suffered during the five months she was suspended from her position at WGCAC. This allegation is not included in her complaint or her amended complaint. The dissent further argues that Bargerstock should at least be compensated for the wages that she lost over the five month period. The trial court instructed the jury that they could consider lost wages as part of her damages under her § 1983 claim. The loss of wages, however, does not necessarily rise to the level of an infringement of Civil Rights. Bargerstock could possibly recover lost wages under a breach of contract or wrongful discharge suit. We note that both of those claims were included in either the complaint or amended complaint but were later withdrawn.