Danawala v. Houston Lighting & Power Co.

IN THE UNITED STATES COURT OF APPEALS
FOR THE FIFTH CIRCUIT
_____________________
No. 92-2333
_____________________
RAFIQ A. DANAWALA,
Plaintiff-Appellant,
versus
HOUSTON LIGHTING & POWER COMPANY, ET AL.,
Defendants-Appellees.
_______________________________________________________
Appeal from the United States District Court for
the Southern District of Texas
_______________________________________________________
August 24, 1993
Before REAVLEY, DUHÉ AND BARKSDALE, Circuit Judges.
REAVLEY, Circuit Judge:
Rafiq A. Danawala sued Houston Lighting & Power (HL&P) and
HL&P Supervisor William Wellborn (collectively defendants),
claiming that Wellborn defamed him by communicating to others
that he falsified a document. After the jury returned a verdict
in favor of Danawala, the district court granted the defendants'
motion for judgment as a matter of law, and conditionally granted
the defendants' alternative motion for a new trial. Danawala
appeals. We hold that Wellborn's communications were privileged
and affirm the district court's judgment.
I. BACKGROUND
Danawala worked as an independent contractor with HL&P at
the South Texas Nuclear Project (STNP). He worked as an engineer
in the Master Parts List Group (the MPL Group), which was
responsible for verifying that any changes in vendors' parts
conform with the fit, form, and function of the original parts.
Defendant Wellborn supervised the MPL Group, which consisted
mostly of contract personnel. In 1989, HL&P established a
company policy requiring the MPL Group engineers to obtain
written verification from the vendor's engineering or quality
assurance department that the part change did not affect the fit,
form, or function of the original part.1
In January 1990, Danawala contacted Ken McKay at vendor
Envirex to verify a part's conformity. McKay, who worked in
Envirex's sales and marketing department, returned a written
confirmation of the part's conformity. After completing the
verification documents, Danawala forwarded them to his
supervisors. According to Danawala, Kanu Patel, who provided
technical support to the MPL Group engineers, returned the
documents to Danawala to inquire about McKay's position at
Envirex. Danawala testified that, when he told Kanu Patel that
McKay was an engineer, Kanu Patel instructed him to write
1
The policy specifically provides:
2.1.1. Part number changes that do not impact fit,
form[,] function, or material. These changes shall be
considered administrative and shall require a signed
letter from the vendor's Engineering or Quality
Assurance organization stating that the change is
administrative only and does not affect fit, form,
function, or material.
2
"engineer" beside McKay's name. After Danawala wrote "engineer"
next to McKay's name, he sent the documents back to his
supervisors. The documents eventually reached supervisor
Wellborn, who discovered that McKay worked in Envirex's sales and
marketing department, and was not an engineer.
By failing to get verification from the engineering or
quality assurance department, Danawala violated HL&P's company
policies. Danawala testified that he simply acted on the
mistaken belief that McKay was an engineer capable of verifying a
part change. According to Danawala, Envirex's engineering
department referred him to McKay.
Wellborn accused Danawala of "falsifying" a company document
and terminated Danawala's services with HL&P. Wellborn testified
that he notified seven people of Danawala's termination for
"falsifying" a document, and then met with the members of the MPL
Group to re-emphasize the importance of proper verification.
Danawala sued HL&P and Wellborn for defamation. At trial,
HL&P argued that (1) the alleged defamatory statement was true,
and (2) Wellborn's communications were privileged because
Wellborn published the statement only to HL&P workers who had an
interest in the subject matter. The district court submitted
issues of truth, privilege, causation, and damages to the jury.
The jury returned a verdict in favor of Danawala, finding him
entitled to $1.5 million in actual damages and $5 million in
punitive damages. The defendants filed a motion for judgment as
a matter of law and an alternative motion for new trial. The
3
district court entered judgment as a matter of law in favor of
HL&P, holding that: (1) the defamatory statement was true; (2)
the defendants did not publish the accusation to anyone other
than people reasonably interested in the matter; (3) the
defendants did not act with malice; and (4) Danawala failed to
prove damages. The district court also granted a conditional new
trial in the event that its judgment as a matter of law is
overturned on appeal. We will assume that the defendants'
communications were defamatory but affirm the judgment as a
matter of law on the ground that they were privileged.
II. ANALYSIS
A. QUALIFIED (OR CONDITIONAL) PRIVILEGE
In Texas, a communication made on a subject matter in which
the person making it has an interest is privileged if made to
persons having a corresponding interest or duty. Bozé v.
Branstetter, 912 F.2d 801, 806 (5th Cir. 1990). This privilege
protects statements made by an employer concerning an employee.
Bergman v. Oshman's Sporting Goods, Inc., 594 S.W.2d 814, 816
(Tex.Civ.App.))Tyler 1980, no writ) ("Accusations against an
employee by his employer or another employee, made to a person
having a corresponding interest or duty in the matter to which
the communication relates, are qualifiedly privileged."). This
privilege is "based on a public policy that recognizes the need
for the free communication of information to protect business and
personal interests. To encourage open communication, it is
necessary to afford protection from liability for misinformation
4
given in an appropriate effort to protect or advance the
interests involved." Gaines v. CUNA Mutual Ins. Soc'y, 681 F.2d
982, 986 (5th Cir. 1982). The privilege is lost, however, if the
plaintiff can show that the defendant acted with actual malice.
Id. Once the underlying factual disputes are resolved, whether a
qualified privilege exists is a question of law. Bozé, 912 F.2d
at 806.
The parties in this case dispute (1) whether Wellborn
communicated to persons not having a corresponding interest in
the subject matter and (2) whether Wellborn made the statements
with malice. The district court submitted these two issues to
the jury, and the jury found that Wellborn published the
statement to people not reasonably interested in the subject
matter and that Wellborn made the statements with malice. In
ruling on the judgment as a matter of law, the district court
disregarded both of these jury findings. See FED. R. CIV. P.
50(b) 1. Excessive Publication
Wellborn testified that he told seven people that Danawala
had been dismissed for falsifying a document: Roger Garris,
Steve Dew, Nitan Patel, Mike Polishak, Steve Veselka, James
Mertink, and Claude Grimes. Garris and Dew were Wellborn's
supervisors. Nitan Patel was one of Danawala's supervisor and
had signed the documents in question. Polishak worked in the MPL
Group and was involved in the initial inquiry into the incident.
Veselka worked in the MPL Group and assisted Wellborn with
administrative duties. Mertink was a supervisor of the Spare
5
Parts Engineering Group, which issued similar documents that had
to be approved by Wellborn. Wellborn told Mertink about the
"falsification" incident so that Mertink would "watch for those
things" before sending documents to him. Grimes was a member of
HL&P's human resources department, which has responsibility over
HL&P's employees, but not contract workers such as Danawala.
Wellborn testified that he called Grimes (a) to verify that the
human resources department had no jurisdiction over contract
workers and (b) to find out what the proper procedures would have
been if Danawala had been an HL&P employee. A few days after
Danawala's termination, Grimes was assigned to address Danawala's
"speakout" complaint that HL&P had wrongfully terminated him.2
Wellborn's communications to these seven people fall well within
the qualified privilege.
A few days after Danawala's termination, Wellborn met with
the members of the MPL Group to re-emphasize the importance of
proper verification. Two of the workers who attended the meeting
testified that Wellborn discussed "falsification of documents" at
the meeting and that they understood that Wellborn was alluding
to Danawala. Even if Wellborn alluded to Danawala at the
meeting, Wellborn's communications to other MPL Group members,
2
The South Texas Project "Speakout" program provides
workers a means to communicate concerns relating to the safety or
quality of the South Texas Project. The manager of the
"Speakout" program referred Danawala's complaint to HL&P's human
resources department because the complaint was unrelated to
nuclear safety or quality.
6
who have an interest in the reasons underlying Danawala's
discharge, fall within the scope of the qualified privilege.
At trial, Danawala presented evidence that the falsification
accusation spread to people outside of HL&P. Danawala testified
that, within a few hours of his termination, he received a call
from Rick Massay, a former HL&P worker, who had learned about the
falsification accusation. The record does not reveal, however,
who told Massay and in what context. Another former HL&P worker,
Joe Navillo, learned that Danawala had been terminated for
falsifying a document. Navillo testified that he learned of the
accusations during a social, non-business-related conversation
with one of the HL&P contract workers. On appeal, Danawala
argues that these "secondary publications" destroy the
defendants' qualified privilege because Wellborn knew or should
have known that his accusation would spread to outside parties.
We disagree. There is no evidence that Wellborn or any other
HL&P supervisor communicated the accusation to persons not
reasonably interested in the subject matter. The unauthorized
gossip spread by unidentified co-workers of Danawala does not
take the defendants outside the scope of their qualified
privilege. Compare Perry Bros. Variety Stores, Inc. v. Layton,
25 S.W.2d 310, 313 (Tex. 1930) (qualified privilege lost where
the store manager charged customer with shoplifting in the
7
presence of other customers who were in the store open to the
general public).3
Finally, Danawala presented evidence that, after HL&P
released him for falsifying a document, he had difficulty finding
long-term employment. But Danawala presented no evidence that
any prospective employer ever learned of HL&P's reasons for
terminating Danawala. The district court correctly observed that
Danawala failed to show a causal connection between his failure
to find long-term employment and HL&P's accusations.
Based on the overwhelming evidence at trial, we conclude
that the defendants did not lose their qualified privilege
through excessive publication. The district court properly
disregarded the jury's contrary finding of excessive publication.
FED. R. CIV. PRO. 50(b); Boeing Co. v. Shipman, 411 F.2d 365, 374-
75 (5th Cir. 1969) (en banc).
2. Actual Malice
The defendants' privilege is lost if Danawala shows that
Wellborn published the statement with actual malice. Seidenstein
v. National Medical Enter., 769 F.2d 1100, 1103-04 (5th Cir.
1985). To show actual malice, Danawala must show that Wellborn
published the statement knowing it to be false, or with a high
degree of awareness of its probable falsity. Id. at 1104. The
focus is on Wellborn's state of mind at the time of publication.
3
See also Rouly v. Enserch Corp., 835 F.2d 1127, 1131-32
(5th Cir. 1988) (applying Louisiana law); Garziano v. E.I. Du
Pont De Nemours & Co., 818 F.2d 380, 395 (5th Cir. 1987)
(applying Mississippi law).
8
See id. "Proof of falsity in fact is not enough, nor is proof of
a combination of falsehood and general hostility." Id.
Danawala contends that the jury could have reasonably
inferred actual malice from Wellborn's testimony at trial.
Wellborn agreed at trial that the term "falsification" implies an
intent to deceive, something more than a mere mistake. Wellborn
also acknowledged at trial that Danawala had made a "mistake."
Danawala argues on appeal that the jury could have reasonably
inferred from these statements that Wellborn knew that his
falsification accusation, which implies deceit, was untrue. We
disagree.
Wellborn testified that he believed that his accusation of
falsification was true or substantially true. He further
explained that he believed that Danawala was attempting to
deceive HL&P by writing "engineer" on the document instead of
following the proper procedures. It is true that Wellborn agreed
that Danawala had made a "mistake." But Wellborn elaborated
during cross examination that Danawala's "mistake" was writing
"engineer" on the document without verifying that McKay was a
member of the engineering or quality assurance department. His
statement that Danawala made a "mistake" must be read with the
rest of his testimony and is in accord with his belief that
Danawala was attempting to deceive HL&P by making the document
appear like he had complied with the proper procedures.
Wellborn's testimony is insufficient to support the jury finding
of malice.
9
Danawala asserts that the evidence at trial shows that
Wellborn's attitude toward Danawala was "abusive, mean, and
vindictive." The record does contain some evidence (mostly
through Danawala's testimony) that Wellborn harbored some ill
feelings toward Danawala. But we agree with the district court
that this evidence of animosity is insufficient for a reasonable
juror to infer actual malice )) that Wellborn knew the statement
was false or had a high degree of awareness of its probable
falsity.
B. INTENTIONAL INFLICTION OF EMOTIONAL DISTRESS
In addition to defamation, Danawala's complaint raised a
claim for intentional infliction of emotional distress. Prior to
trial, the district court dismissed this claim, leaving only
Danawala's defamation claim.
To recover for intentional infliction of emotional distress,
Danawala must establish that (1) Wellborn acted intentionally or
recklessly, (2) Wellborn's conduct was extreme and outrageous,
(3) Wellborn's actions caused him emotional distress, and (4) the
emotional distress was severe. Twyman v, Twyman, 855 S.W.2d 619,
___ (Tex. 1993). "Outrageous conduct is that which '[goes]
beyond all possible bounds of decency, and to be regarded as
atrocious, and utterly intolerable in a civilized community.'"
Wornick Co. v. Casas, 1993 WL 233445 at *2, ___ S.W.2d ___, ___
(Tex. 1993) (quoting RESTATEMENT (SECOND) OF TORTS § 46, cmt. d).
"'It is for the court to determine, in the first instance,
whether the defendant's conduct may reasonably be regarded as so
10
extreme and outrageous as to permit recovery.'" Id. (quoting
RESTATEMENT (SECOND) OF TORTS § 46, cmt. h). Without question, the
record to support this claim has been fully developed. And it
reveals that Wellborn's conduct, as a matter of law, did not
"exceed all possible bounds of decency" and was not "utterly
intolerable in a civilized community." See Diamond Shamrock
Refining and Mktg. Co. v. Mendez, 844 S.W.2d 198, 201-02 (Tex.
1992), cited in Wornick, 1993 WL 233445, at *3; Johnson v.
Merrell Dow Pharmaceuticals, Inc., 965 F.2d 31, 33-34 (5th Cir.
1992); Wilson v. Monarch Paper Co., 939 F.2d 1138, 1142-45 (5th
Cir. 1991); Dean v. Ford Motor Credit Co., 885 F.2d 300, 306-07
(5th Cir. 1989). We thus affirm the district court's dismissal
of Danawala's claim for intentional infliction of emotional
distress.
AFFIRMED.
11