Rockwood Bank v. Gaia

• Decision Date: 24 June 1999
• Docket Number: Nos. 97-4122,98-1081EM,s. 97-4122
• Citation: 170 F.3d 833
• Parties: 14 IER Cases 1647 ROCKWOOD BANK, Defendant-Appellant/Cross-Appellee, v. M. Michael GAIA, Plaintiff-Appellee/Cross-Appellant.
• Court: U.S. Court of Appeals — Eighth Circuit

Page 833

170 F.3d 833

14 IER Cases 1647

ROCKWOOD BANK, Defendant-Appellant/Cross-Appellee, v. M. Michael GAIA, Plaintiff-Appellee/Cross-Appellant.

Nos. 97-4122, 98-1081EM.

United States Court of Appeals,

Eighth Circuit.

Submitted Nov. 16, 1998.

Decided March 15, 1999.

Rehearing and Rehearing En Banc Denied June 24, 1999.

David William White, Overland Park, KS, argued, for Defendant-Appellant/Cross-Appellee.

Charles A. Seigel, III, St. Louis, MO, argued, for Plaintiff-Appellee/Cross-Appellant.

Before RICHARD S. ARNOLD and FAGG, Circuit Judges, and DAWSON ¹, District Judge.

DAWSON, District Judge.

Rockwood Bank appeals following a judgment in a defamation action brought by a bank employee after the president of the bank made certain statements about the employee to bank examiners during routine bank examinations. The employee, M. Michael Gaia, who had been demoted by the bank, sought other employment and was listed as the proposed president within the charter application forms for a new bank. Because of the comments made by the president that were contained within the reports of bank examiners, the Missouri Commissioner of Finance refused to grant the new bank charter as long as Gaia was listed as president. Gaia filed suit for age discrimination and defamation; a jury found for the bank on the discrimination claim but awarded Gaia actual and punitive damages on the slander claim.

For reversal, Rockwood Bank contends that because of the very nature of bank examinations, its communications with bank examiners are protected by either an absolute or qualified privilege entitling the bank to immunity from civil liability. Rockwood Bank also contends that the communications were not defamatory. For reversal on the cross-appeal, Gaia contends that the district court's instructions to the jury on the issues of illegal age discrimination were not correct statements of the law. We reject the contentions of both and AFFIRM the decision of the district court.

Jurisdiction of this court is proper under the provisions of 28 U.S.C. §§ 636(c)(3), 1291 and 1294.

I. Factual Background

In March, 1992, the Board of Directors of Rockwood Bank voted to hire Gaia as executive vice president of the bank over the objections of the bank president. At the time Gaia was hired, he was fifty-five years old and had twenty-one years of experience as a bank officer and fifteen of experience as a bank president. Gaia was considerably older and more experienced than the acting president of Rockwood Bank. According to Gaia, the bank president told him that he had wanted to hire someone younger and less experienced than Gaia because such a person would have been easier to train. From the beginning of their professional relationship, tensions existed between the bank president and Gaia, with the bank president continually criticizing and expressing dissatisfaction with Gaia's performance. The record contains evidence that the bank president did not provide Gaia with a specific job description or duties and responsibilities; that he instructed Gaia to perform clerical tasks not typically assigned to senior level executives and failed to provide him with training; and that he directed Gaia not to perform other clerical tasks which Gaia deemed necessary to process customers' business. In addition, Gaia's personnel file was filled with memoranda and notes regarding his performance and his file was shown to be much more detailed and extensive than the file of any other bank employee. Despite the frequent fault-finding by the bank president, Rockwood's Board of Directors appeared satisfied with Gaia's performance and granted him salary and benefit increases and stock options every year that Gaia served as executive vice-president.

In September 1994, the bank president was able to convince the Board that Gaia was not fulfilling his duties in an acceptable manner. Despite Gaia's attempts to defend himself and persuade the Board that he was being wrongly disparaged by the bank president, the Board gave Gaia an ultimatum either to accept a demotion or be terminated. Gaia agreed to the demotion. However, the working relationship between Gaia and the bank president remained strained and Gaia eventually came to believe that his days at Rockwood Bank were numbered. In the summer of 1995, Gaia began looking for other employment. During this time, Gaia was approached by a group of investors who were organizing a new bank about the possibility of naming Gaia as the president of the new bank. In due course, Gaia was listed as the proposed president of the new bank seeking to organize under a state banking charter.

At or about the time of Gaia's demotion, routine bank examinations were conducted by the FDIC and Missouri Division of Finance. During the course of these examinations, the bank examiners discussed with Rockwood's president the job performance of Gaia and other employees. While the bank president's comments were contained within the confidential section of both reports, they were not included in the reports of examination made available to the bank, its board, the president, or Gaia. The comments were contained in the full reports of both examinations, and it was the full reports that the Missouri Bank Commission reviewed in connection with the application for the new bank charter which proposed Gaia as its president.

The language concerning Gaia in the report of the FDIC examination that was conducted in June 1995 was as follows, to-wit:

The minutes of a Personnel Committee meeting on May 25, 1995, disclosed that President Lunt was recommending that Vice President Mike Gaia be fired. When questioned, President Lunt stated that Mr. Gia [sic] had not lived up to expectations since his employment. Mr. Lunt felt he would have the Board's support in this matter and hoped to be able to interview shortly for an Executive Officer who would effectively take Mr. Gaia's place.

The language within the report of the Missouri Division of Finance examination conducted in January 1995 was similar and was as follows, to-wit:

Mike Gaia has been demoted from Executive Vice President to Vice President. His primary responsibility is now business development. His efforts to complete assigned tasks such as policy revisions and implementation of the loan grading system have failed. President Lunt appeared very displeased with Mr. Gaia's weak performance and stated that he has an indefinite probationary period to produce results. In addition, President Lunt stated that he has created much animosity among the Board of Directors.

Based largely upon these confidential comments, the Missouri Bank Commission reached a decision and advised the directors of the newly formed bank that their charter would be approved only if Gaia was not president. Gaia was then offered a lesser position with the new bank. On or about December 8, 1995, Gaia left his employment at Rockwood Bank and a few weeks later took the lesser position offered at the new bank. Gaia contends that Rockwood's president fired him without the approval of the Board of Directors, while Rockwood contends that Gaia resigned to accept the offer of other employment.

The litigation by Gaia was filed following the commencement of his employment at the newly formed bank. With regard to the claim of age discrimination, the issues of pretext concerning the bank's proffered explanation for Gaia's demotion and whether Gaia voluntarily resigned or was discharged from his position at Rockwood Bank were thoroughly litigated. At the close of evidence, the district court gave the following instruction to the jury:

Plaintiff must prove by a preponderance of the evidence that his age was the determining factor in the Defendant's decisions to demote and discharge him. Age is the determining factor if Plaintiff would not have been demoted and discharged except for his age.

The jury returned a verdict in favor of Rockwood Bank on Gaia's age discrimination claims and in favor of Gaia on the defamation claim. The jury awarded Gaia $200,000 in actual damages and $75,000 in punitive damages upon making a finding of actual malice.

II. Discussion

A. Absolute or Qualified Immunity from Liability

The first issue the Court shall address is whether any privilege exists that would shield a bank, its officers or board members from civil liability for allegedly defamatory comments made to bank examiners during the course of a routine examination of the bank. Rockwood Bank contends that the district court erred when it failed to recognize that the bank is entitled to immunity from liability for statements made to bank examiners in the course of routine bank examinations because those statements are protected by either an absolute or qualified privilege. This is a case of first impression, and amicus briefs have been filed by the Missouri Commissioner of Finance, the Missouri Bankers Association, and the Federal Deposit Insurance Corporation, who argue that public policy must allow full and complete comment and disclosure in connection with any bank examination without fear of litigation.

Although there are some federal implications because of the involvement of the Federal Deposit Insurance Corporation (FDIC), Missouri law governs Gaia's slander claim against Rockwood as well as the claim of absolute or qualified privilege for the statements made by Rockwood's president to the Missouri Division of Finance. In re IBP Confidential Bus. Documents Litigation, 797 F.2d 632, 639 (8th Cir.1986) (citing Webster v. Sun Co., 790 F.2d 157, 160 (D.C.Cir.1986)). Whether a statement is absolutely privileged is a question of law which we review de novo. Scott Fetzer Company v. Williamson, 101 F.3d 549, 553 (8th Cir.1996); Wright v. Over-The-Road & City Transfer Drivers, Helpers, Dockmen and Warehousemen, 945 S.W.2d 481, 490 (Mo.App.1997).

Missouri courts adhere to the common law principle that "statements made during the proceedings of a...