Babb v. Minder

• Decision Date: 21 November 1986
• Docket Number: No. 85-2533,85-2533
• Citation: 806 F.2d 749
• Parties: Linda S. BABB, Plaintiff-Appellee, v. Paul MINDER and Carter-Jones Lumber Company, an Ohio Corporation, Defendants-Appellants.
• Court: U.S. Court of Appeals — Seventh Circuit

Page 749

806 F.2d 749

Linda S. BABB, Plaintiff-Appellee, v. Paul MINDER and Carter-Jones Lumber Company, an Ohio Corporation, Defendants-Appellants.

No. 85-2533.

United States Court of Appeals Seventh Circuit.

Argued April 4, 1986.

Decided Nov. 21, 1986.

Ivan L. Schraeder, Jefferson City, Mo., for defendants-appellants.

Joseph C. Honan, Bloomington, Ill., for plaintiff-appellee.

Before WOOD and COFFEY, Circuit Judges, and ESCHBACH, Senior Circuit Judge.

HARLINGTON WOOD, Jr., Circuit Judge.

This diversity action arose when defendant Paul Minder, a manager for defendant Carter-Jones Lumber Company ("Carter-Jones"), in a conversation with Lindell Frasure, Linda Babb's immediate supervisor, allegedly slandered plaintiff Babb. Babb sued Minder and Carter-Jones for defamation. The jury found for Babb and awarded her $10,000 compensatory and $15,000 punitive damages. Both defendants appeal from the district court's denial of their motion for a new trial or for a judgment notwithstanding the verdict. We affirm.

I. FACTS

Babb was employed in Heyworth, Illinois, at Carter Lumber Company, a wholly-owned subsidiary of Carter-Jones, an Ohio corporation. On July 5, 1983, Babb's supervisor, Frasure, informed her that her employment was terminated because of her unprofessional conduct on the job. Specifically, Frasure stated that Minder, manager of Carter Lumber, wanted Babb fired because she had "mooned" one employee and had offered sexual favors to another. Frasure testified that Minder had not indicated to her which employee had allegedly been "mooned," but that she knew the identity of the employee from rumors. Frasure filled out a notice of termination, checking as the reason for termination "do not need." Frasure sent the notice to Ohio, but did not send a copy of the notice to the president of Carter Lumber. Frasure also testified that Minder informed her that his decision to discharge plaintiff was final and that it would do no good for either Frasure or Babb to argue about it.

Minder, also the general manager and assistant vice-president of Carter-Jones, at that time was on loan to Carter Lumber to manage the Heyworth facility. Minder remained in Ohio and performed his management duties for Carter Lumber by telephone. Carter Lumber reimbursed Carter-Jones for Minder's services. As manager for Carter Lumber, Minder was responsible for overseeing, hiring, and firing Heyworth employees.

Mark Melgosa, a yard foreman at Carter Lumber, testified that he had heard a rumor that Babb had exposed her bare buttocks to another employee, Larry Middleton. Melgosa confronted plaintiff, but she denied the "mooning" incident ever occurred. Melgosa informed Minder in a telephone conversation about the rumor. There was also a separate suggestion that Babb had offered Melgosa sexual favors in return for a job for her father-in-law.

On July 6, the day after plaintiff was fired at Minder's direction, Melgosa and Middleton each sent handwritten memos to Minder. Melgosa's memo stated that he had heard a rumor about the "mooning" incident and that when he asked Babb what happened she demonstrated by showing him the "top part of her posterior." At the time Melgosa sent this memo, however, he had not talked to Middleton about the alleged incident.

Also on July 6, Babb sent a letter to Minder after trying unsuccessfully to reach him by telephone. In the letter, Babb denied that either of the two alleged unprofessional acts with Middleton or Melgosa had occurred. She also stated in the letter that she could produce written statements from witnesses to support her denials. Babb stated further that she had not been notified prior to her termination of any wrongdoing. She asked that Minder reconsider his decision, reinvestigate the incidents, or at least provide her with a more detailed explanation of her discharge.

On July 13 Melgosa sent a typed memo to Minder stating that he had spoken to Babb and Middleton and that he believed Babb had done the "mooning." The memo also stated that Babb showed Melgosa what she had done. Middleton also sent Minder a typed memo describing the alleged incident. Minder had directed both Melgosa and Middleton to type up their prior handwritten memos, with another person assisting them in making the memos more professional, or they would lose their jobs.

At trial, Middleton testified that the allegations against Babb were untrue and that he had signed the memo out of fear of losing his job. Melgosa also testified that Babb never offered to have sex with him in return for a job for her father-in-law.

After the jury trial, in which the jury found for Babb and awarded her compensatory and punitive damages, defendants filed a post-trial motion for judgment n.o.v. or for a new trial. The district court denied the motion and refused to reduce both the actual and the punitive damages.

II. STANDARDS OF REVIEW

Even though in reviewing a trial court's disposition of a motion for a new trial in a diversity case we apply federal law, and overturn the motion's denial only where the circumstances reveal a clear abuse of discretion, Thor Power Tool Co. v. Weintraub, 791 F.2d 579, 582 (7th Cir.1986), in diversity actions we apply state law to dispositions of a motion for judgment notwithstanding the verdict. Under Illinois law a judgment notwithstanding the verdict is properly granted by a trial court, and we apply the same standard on review, only when the evidence is so overwhelmingly in favor of the movant that no contrary verdict based on the evidence could ever stand. Id. at 583.

III. DISCUSSION

Defendants argue that the court should have entered a judgment n.o.v. for them because no actionable defamation occurred. Alternatively, the defendants contend that a new trial is warranted because the court refused to give defendants' "innocent construction" instruction to the jury. Finally, defendants argue as a third alternative that the punitive damages award must be set aside and that the actual damages must be reduced.

A. Agency Relationship

Defendant Carter-Jones argues that the district court erred in not granting a judgment n.o.v. in its favor based on the lack of an agency relationship between it and defendant Minder.

The evidence at trial on the agency issue, however, was not so overwhelmingly in favor of Carter-Jones that no contrary verdict based on that evidence could ever stand. Under Illinois law, an employer is liable for the willful, malicious, negligent, or criminal acts of its employees if the acts furthered the employer's business and were performed in the course of employment. Bremen State Bank v. Hartford Accident & Indemnity Co., 427 F.2d 425, 428 (7th Cir.1970). If an employee is not acting as the employer's agent, however, the employer is not liable for the employee's actions. In this case, Carter-Jones claimed that it "loaned" Minder to Carter Lumber and therefore cannot be liable for Minder's acts while he was acting only for Carter Lumber. Mosley v. Northwestern Steel & Wire Co., 76 Ill.App.3d 710, 31 Ill.Dec. 853, 859-60, 384 N.E.2d 1230, 1236-37 (1st Dist.1979).

Carter-Jones's claim required the jury to apply the Illinois loaned-employee doctrine. Under this doctrine the jury had to determine if Carter-Jones's "loaning" of Minder was to such an extent that Minder actually became an employee of Carter Lumber. This determination is made by looking at a number of factors, including actual control, the employee's consent, and power to discharge. Id.

Minder's supervisor at Carter-Jones, Jerome Lesnick, testified that he made a verbal agreement with Bryan Carter, the president of Carter Lumber, to loan Minder to Carter Lumber. Lesnick stated that he relinquished all control over Minder to Bryan Carter while Minder was managing the Heyworth facility. Lesnick also testified that while Minder managed the Heyworth facility he did not control Minder and that Minder's work at Heyworth was performed for Carter Lumber, not for Carter-Jones. Lesnick also stated, however, that Minder was not a party to the agreement with Bryan Carter and that Minder never consented to the loan of his services to Carter Lumber. Furthermore, Minder remained at Carter-Jones's facility in Sunbury, Ohio, and performed his duties for Carter Lumber by telephone. Minder rarely travelled to Heyworth. Although Carter-Jones assessed a fee from Carter Lumber for Minder's services, Minder was actually paid by Carter-Jones, as Minder's income tax forms for 1983 indicate. Carter-Jones never presented evidence that Carter Lumber had any authority to discharge Minder or that Bryan Carter exercised control over Minder's personnel decisions for the Heyworth plant.

On these facts adduced at trial, the evidence does not so overwhelmingly favor defendant Carter-Jones's loaned-employee claim that a contrary verdict could never stand. The district court's denial of defendants' motion for a judgment n.o.v. on the agency issue was therefore appropriate.

B. Qualified Privilege

Defendants assert as a further defense that the district court erred in refusing to find as a matter of law that defendant Minder had a qualified privilege. Defendants' related claim is that plaintiff did not produce sufficient evidence to overcome Minder's privilege.

A qualified privilege is an affirmative defense to a defamation claim. Fascian v. Bratz, 96 Ill.App.3d 367, 51 Ill.Dec. 901, 904, 421 N.E.2d 409, 412 (3d Dist.1981). The existence of such a privilege is a question of law for the court to decide. Myers v. Spohnholtz, 11 Ill.App.3d 560, 297 N.E.2d 183, 188 (1st Dist.1973). The elements of a qualified privilege are: (1) good faith by the defendant; ¹ (2) an interest or duty to be upheld; (3) a statement limited in its scope to that purpose; (4) a proper occasion; and (5) publication in a proper manner and to proper parties only. Zeinfeld v. Hayes Freight Lines, Inc., 41 Ill.2d 345, 243 N.E.2d 217, 221 (1968). Once the court decides that a qualified...