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A Lesson For Employers In $3 Million Defamation Verdict

Published by on November 3, 2008

A federal court jury in Greenville, South Carolina, has awarded a Target customer $3 million in her defamation suit against the company.  Although not an employment case, the case has an interesting lesson for employers. The plaintiff presented an old $100 bill for payment at Target.  The store questioned the bill as counterfeit and the […]

A federal court jury in Greenville, South Carolina, has awarded a Target customer $3 million in her defamation suit against the company.  Although not an employment case, the case has an interesting lesson for employers.

The plaintiff presented an old $100 bill for payment at Target.  The store questioned the bill as counterfeit and the plaintiff left the store.  The next day, one of Target’s asset protection employees emailed a picture of the plaintiff from the store’s security camera to a loss prevention employee at another retailer.  The email stated that the person in the picture had attempted to pass a counterfeit $100 bill.  He intended that the recipient would forward the email onto a network of loss prevention specialists in South Carolina.  The email was so forwarded.

One of the recipients of the email was the plaintiff’s employer, who contacted the Secret Service.  The Secret Service interviewed the plaintiff, inspected the $100 bill, and affirmed that it was legitimate.

The plaintiff subsequently filed a lawsuit against Target alleging defamation and negligence in failing to properly train its employees and exercise reasonable care.  As noted above, the jury awarded the plaintiff $100,000 in compensatory damages and $3 million in punitive damages.

What is the lesson for employers here?  When making potentially derogatory communications about employees (or former employees), the people receiving the communication should be those who have a business “need to know” the information and the subject matter of the communication should be limited to information that is necessary and relevant to that “need to know”.  Failure to put constraints on the communication may result in the employee’s defamation claim going to a jury.

In this case, Target asserted a “qualified privilege” to the defamation claim.  They claimed that the person sending the email had an interest or duty in reporting the issue.  Assuming the situation fell within the privilege, the plaintiff would then have to present evidence to show that the privilege was abused.  This inquiry would look at whether the defendant acted in good faith in making the statement, whether the statement was properly limited in its scope, and whether the statement was sent only to the proper parties.  (These are the factors under South Carolina law.  They may be different in other jurisdictions, but the general privilege analysis tends to be the same.)  In ruling on Target’s motion for summary judgment to dismiss the claims before trial, the court concluded that a reasonable jury could find that the language of the email was not properly limited in its scope and that the distribution of the email to the entire loss prevention group was beyond the scope of people with a legitimate need to know the information.

This is relevant to employers because the same issues come up in defamation claims brought by employees.  For example, an employee is fired for stealing.  An email is sent around the company advising everyone of that fact.  In a subsequent defamation lawsuit, the employer will argue that the email was subject to the qualified privilege, and the employee will argue that the employer abused the privilege.  Therefore, as noted above, when making potentially derogatory communications about an employee (or former employee) be sure to act in good faith in making the statement (certainly try to avoid language suggesting ill will towards the person), keep the statement properly limited in its scope, and make the communication only to the proper parties with a business “need to know” the information.

A news story about the verdict is here.  The judge’s opinion denying Target’s pretrial motion for summary judgment can be found here.

Hat tip to Overlawyered.com for a post on the case.

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