Brackin v. Trimmier Law Firm

• Decision Date: 28 May 2004
• Parties: Karen BRACKIN v. TRIMMIER LAW FIRM, Alabama Credit Union League, and Jo Lynn Rutledge. Family Security Credit Union v. Karen Brackin.
• Court: Alabama Supreme Court

897 So.2d 207

Karen BRACKIN v. TRIMMIER LAW FIRM, Alabama Credit Union League, and Jo Lynn Rutledge.

Family Security Credit Union v. Karen Brackin.

1093.

Supreme Court of Alabama.

May 28, 2004.

As Modified on Denial of Rehearing September 10, 2004.

Order Overruling Rehearing Applications and Statement of Nonrecusal September 10, 2004.

Thomas E. Baddley, Jr., and Jeffrey P. Mauro of Baddley & Mauro, LLC, Birmingham; and Terry L. Butts of Cervera, Ralph & Butts, Troy, for appellant/cross-appellee Karen Brackin.

James N. Nolan and Anu M. Brady of Walston, Wells, Anderson & Bains, LLP, Birmingham, for appellant Family Security Credit Union, and appellees Alabama Credit Union League and Jo Lynn Rutledge.

Ronald G. Davenport and R. Austin Huffaker, Jr., of Rushton, Stakely, Johnston & Garrett, P.A., Montgomery, for appellee Trimmier Law Firm.

William H. Pryor, Jr., atty. gen., Nathan A. Forrester, deputy attorney. gen., and Scott L. Rouse, asst. atty. gen., for amicus curiae State of Alabama, in support of the appellant Family Security Credit Union.

Lee H. Copeland and Mitchel H. Boles of Copeland, Franco, Screws & Gill, P.A., Montgomery, for amicus curiae Alabama Bankers Association, in support of the appellant Family Security Credit Union.

James N. Nolan, Anu M. Brady, and Kary Bryant Wolfe of Walston, Wells, Anderson & Baines, LLP, Birmingham, for appellant Family Security Credit Union and appellees Alabama Credit Union League and Joy Lynn Rutledge, on applications for rehearing.

Lee H. Copeland and Mitchel H. Boles of Copeland, Franco, Screws & Gill, P.A., Montgomery, for amicus curiae Alabama Bankers Association, in opposition to Karen Brackin's recusal motion, on applications for rehearing.

STUART, Justice.

In case no. 1021005, Karen Brackin appeals from judgments entered in favor of the Trimmier Law Firm, Alabama Credit Union League, and Jo Lynn Rutledge. We affirm those judgments.

In case no. 1021593, Family Security Credit Union ("FSCU") appeals from a judgment entered in favor of Brackin, a former FSCU employee. After a jury trial, a Morgan County jury awarded Brackin $800,000 in compensatory damages and $200,000 in punitive damages on her defamation claims based on certain statements made by Brackin's former co-employees to an auditor during an investigation performed at FSCU following a finding of improprieties during an audit. FSCU appeals from the judgment entered on the jury's verdict. We reverse and remand.

Background

In April 1999, an audit of FSCU identified apparent improprieties in the files at FSCU related to a former employee of FSCU, Mitchell Smith.¹ As a result of finding these apparent improprieties, Alabama Credit Union Administration ("ACUA")² issued to FSCU a "Document of Resolution," referred to as a "DOR." This DOR directed FSCU's supervisory committee to "engage an outside firm to confirm the entries listed in the supplemental facts section of this report and any other related activity discovered during the review." The "supplemental facts section" of the DOR referred to potential lending violations and other improprieties by Smith. The DOR also instructed FSCU to "provide your findings to the Alabama Credit Union Administration, ACUA, and National Credit Union Administration, NCUA."

FSCU retained Steve Trimmier, the senior partner with the Trimmer Law Firm, to conduct the investigation. The Trimmier Law Firm was FSCU's legal counsel. In turn, the Trimmier Law Firm retained Jo Lynn Rutledge, a certified public accountant employed with the Alabama Credit Union League ("ACUL")³ as the director of its auditing department, to conduct the investigation of Smith's activities at FSCU. Rutledge had previously audited FSCU, performing routine annual audits at FSCU beginning as early as 1994 or 1995. She reported the results of each of those previous audits directly to the supervisory committee of FSCU. Rutledge audited FSCU during those years in which Smith's wrongful activities went undiscovered.

Brackin was the manager of lending, marketing, and human resources at FSCU, second in command only to Ron Fields, the president at FSCU. It was undisputed that, at various times throughout her employment with FSCU, Brackin had advised Fields when certain loan officers were not following the policies, procedures, or recommended lending practices of FSCU. Fields acknowledged that Brackin initially discovered and reported to him the violations and improprieties involving Smith.⁴

The 1999 Audit

Rutledge spent September 8, 9, and 10, 1999, at FSCU. Fields, Brackin, and several other FSCU employees were attending an out-of-state conference during that time. On September 9, while reviewing computer reports at FSCU, Rutledge noticed that the due dates on several loans originated by Smith had been "advanced."⁵ The computer reports indicated that John Salter and Ann McMillan were the loans officers who had entered the new due dates into the computer. Rutledge questioned Salter and McMillan; they both explained that Brackin had instructed them to change the due dates and that she did so often. At that point, Salter suggested that Rutledge speak with Rolanda Johnson, another FSCU employee, about Brackin.⁶

By the end of the day on September 10, Rutledge had spoken to FSCU employees John Salter, Ann McMillan, Rolanda Johnson, Tanya Drain, Bobby Chitwood, Dennis Smith, and Debra McCaghren concerning Brackin. Rutledge claimed that "[a]s I spoke to one, they referred me to another with issues related to Karen Brackin." Rutledge instructed the employees to reduce their statements to writing. Those writings were unsworn.

Rutledge testified that she "felt an urgency" to discuss with someone the statements made to her about Brackin. When she could not reach Steve Trimmier, she contacted Lloyd Moore, the senior examiner with the ACUA, to discuss what she had been told by the FSCU employees.⁷ She did not attempt to contact any member of the FSCU supervisory committee, although that was her usual reporting procedure.

Rutledge then prepared a written summary of the information she learned about Brackin during her audit of FSCU. In her report, Rutledge wrote:

"I was at [FSCU] on September 8, 9, and 10th of 1999 to further research items related to loans made by Mitchell Smith. In review of loans made to a number of related parties of [W.G.], I noted that due dates had been file-maintained⁸ resulting in the advancing of the due dates of these loans. User number 148, Ann McMillan, and 146, John Salter, were noted as having performed the file maintenance. In most instances, no extension agreements were noted in the loan files. In a few instances, extension agreements were noted in the loan files that were neither signed by the member or approved by the credit committee. Upon questioning, John Salter and Ann McMillan stated that they had both advanced these due dates solely at the direction of Karen Brackin. Per both John and Ann, Karen would ask for a delinquent loan report and call a meeting at mid-month. She would then direct the attention of both employees to loans, some with large balances, on which she wanted the due date advanced with statements such as `don't let this one hit us.' I asked both of these employees if there were any other instances in which Karen Brackin had directed them to advance due dates without the approval of the credit committee. Both employees directed me to family members of Karen Brackin. I did note that due dates had been advanced on [Leroy T., J.T., Larry T. and W.G.B.]. The loan files of [Leroy T., J.T., and Larry T.] were reviewed and copied. No extension agreements were noted in these files. The loan file of [W.G.B.] could not be located. It is my understanding that all extension agreements must be approved by the credit committee. Both Ann McMillan and John Salter informed me they are now refusing to advance due dates when directed to do so by Karen Brackin. A report of file maintenance to due dates for the period of 1997 through 1999 was obtained from the data processing department and is 99 pages long.

"In addition, loan proceeds of $150,000 were recently disbursed on an Equity Express line of credit to [D.T.], another related party of Karen Brackin. The loan file of [D.T.] could not initially be located at the credit union. Conversations with Rolanda Johnson and John Salter regarding this loan revealed the following. Karen Brackin instructed Rolanda Johnson, in the presence of John Salter, to take the $150,000.00 proceeds check for the loan to the attorney's office and to carry the loan file with her as though she was taking the loan documentation to be signed. She also instructed Rolanda to `not take the loan file into the attorney's office' but to return it to her when she returned to the credit union at which time, Karen told Rolanda that if anyone asked her where the documentation was to state that she did not know. The loan documentation was therefore unsigned at the time the proceeds were disbursed and this was known to Karen Brackin. She also told Rolanda to call the attorney and inform him that this was a `cash deal' approximately one week before the check was disbursed. Karen Brackin had a phone conversation with Rolanda while I was at the credit union and informed Rolanda that the loan file was in the trunk of her car.⁹ I have been told that the maximum amount of Equity Express loans is $50,000.00. All business purpose loans are supposed to be approved by Ron Fields. This loan file was subsequently found by Ron Fields and Ernestine McDonald in the bottom of one of the drawers in Karen Brackin's office and all documentation was unsigned.¹⁰

"Another loan on which I believe the proceeds were disbursed prior to the documentation being signed by the member is a $259,000.00 loan to [M.A. and A.A.]¹¹ This loan file is missing and apparently has been for some time. Rolanda and John Salter do remember witnessing the members sign the documentation while

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