Esmark Apparel, Inc. v. James

• Decision Date: 10 January 1994
• Docket Number: No. 92-7522,92-7522
• Citation: 10 F.3d 1156
• Parties: 127 Lab.Cas. P 57,597 ESMARK APPAREL, INC., Plaintiff-Appellant/Cross-Appellee, v. Thomas JAMES et al., Defendants, Thomas James, Defendant-Appellee/Cross-Appellant.
• Court: U.S. Court of Appeals — Fifth Circuit

Page 1156

10 F.3d 1156

127 Lab.Cas. P 57,597

ESMARK APPAREL, INC., Plaintiff-Appellant/Cross-Appellee, v. Thomas JAMES et al., Defendants Thomas James, Defendant-Appellee/Cross-Appellant.

No. 92-7522.

United States Court of Appeals Fifth Circuit.

Jan. 10, 1994.

Rehearing Denied Feb. 14, 1994.

Larry E. Parrish, Memphis, TN, for appellant.

T.H. Freeland, III, Hale Freeland, Freeland, Freeland & Wilson, Oxford, MS, for appellee.

Appeals from the United States District Court for the Northern District of Mississippi.

Before GARWOOD, DAVIS and SMITH, Circuit Judges.

W. EUGENE DAVIS, Circuit Judge:

Esmark Apparel, Inc. sued a group of former employees alleging that they conspired to convert company property and to misappropriate company funds. One of the employees, Thomas James, counterclaimed alleging that he was defamed when the company announced to his co-workers that he had been fired for his involvement in the conspiracy. The district court dismissed both the original claim and the counterclaim on cross-motions for summary judgment, and both parties now appeal. Based on our review of the record, we affirm both grants of summary judgment.

I.

Esmark Apparel, Inc. ("Esmark") is a manufacturer and distributor of women's hosiery. The company, headquartered in New York, has a distribution center in Memphis, Tennessee and a manufacturing plant in Grenada, Mississippi. Thomas James was employed at the Grenada plant from 1951 until 1989, where he was in charge of various aspects of production and inventory control.

During the time period at issue, Robert Tadin, a co-defendant in this case, worked in Esmark's Memphis office. When the Memphis office received an order, Tadin would instruct James in Grenada to prepare the hosiery for delivery. Ordinarily, Tadin transmitted the orders to Grenada via computer, and based on the computer record, the Memphis office would issue an invoice to the customer. On occasion, however, Tadin would send a "manual" order to Grenada by telephone or by mail, and James would send an inter-office memorandum to Memphis from which an invoice would be generated and mailed to the customer.

At the end of 1987, Van Hawthorne, Esmark's chief accountant in Grenada, discovered a discrepancy between the company's book inventory and its physical inventory. In investigating the discrepancy, Hawthorne discovered that for certain "manual" orders filled by the Grenada plant, Esmark had failed to generate invoices and therefore had not been paid. Hawthorne informed Bill Craig, the executive in charge of the Grenada operation, about these unpaid orders.

By cross-referencing some of James' inter-office memoranda with the company's invoice records, Esmark discovered that the unpaid orders had been filled for Dooksie "D.L." Maynard, a regular purchaser of hosiery from the Grenada plant. Knowing that Tadin had handled these orders, Craig questioned him about the problem. Tadin confessed that he had intercepted James' memoranda and kept Maynard's cash payments for these orders. Tadin was subsequently discharged. Although Tadin insisted that no other Esmark employees were involved in the scheme, the company continued to investigate to determine whether other employees might be implicated.

In June 1989, Esmark sued Tadin, Maynard, and several "Does." In its complaint, Esmark asserted causes of action for common law conspiracy, conversion, fraud, and breach of the duty of loyalty, as well as RICO claims under 18 U.S.C. Sec. 1962(a)-(d). Esmark based its allegations on the defendants' suspected involvement in a scheme to convert company property and to misappropriate company funds.

Following further internal investigation, Esmark decided to fire James for his participation in the alleged scheme. In December 1989, Craig travelled to Grenada, where he informed James that he was being terminated for his role in the alleged conspiracy and escorted him off the premises. Craig then assembled the plant's management-level employees and announced that James had been dismissed for his involvement in a scheme to misappropriate company funds. In February 1990, Esmark amended its complaint to name James as a co-defendant in its suit against Tadin and Maynard. In his answer, James asserted a counterclaim against Esmark for defamation based on Craig's statement to the Grenada employees.

Following discovery, both parties moved for summary judgment on the claims against them. In a memorandum opinion, the district court granted both parties' motions and dismissed the case. The court concluded that although Esmark's evidence showed that James was "in a position" to participate in the misappropriation of Esmark funds, a rational jury could not find that he took part in such activity. With respect to James' defamation claim, the court concluded that since Craig's statement was made only to management-level employees and was limited to the circumstances of their co-worker's dismissal, the "occasion" of the alleged defamatory statement was qualifiedly privileged. The court also concluded that James had failed to overcome Esmark's qualified privilege by establishing either excessive publication or actual malice on the part of the company.

Esmark subsequently filed a motion to alter or amend the judgment, and James responded by filing a motion for sanctions and attorneys' fees. The district court, however, denied both motions. Esmark then filed its notice of appeal, and James filed his notice of cross-appeal.

II.

A.

We review a grant of summary judgment de novo, applying the same standard of review as the district court. See Jackson v. Federal Deposit Ins. Corp., 981 F.2d 730, 732 (5th Cir.1992). To sustain a grant of summary judgment, the pleadings, depositions, admissions, answers to interrogatories, and affidavits must demonstrate the absence of a genuine issue of material fact. See Celotex Corp. v. Catrett, 477 U.S. 317, 322, 106 S.Ct. 2548, 2553, 91 L.Ed.2d 265, 273 (1986). If the record would not allow a rational jury to find for the nonmoving party, no genuine issue remains. See Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 587, 106 S.Ct. 1348, 1356, 89 L.Ed.2d 538, 552 (1986).

Esmark first argues that it was not required to establish the existence of a genuine issue of material fact because James failed to demonstrate the absence of such issues in his summary judgment motion. Based on our review of the record, however, we agree with the district court that James satisfied his initial burden and that Esmark was required to establish the existence of a genuine issue of material fact to survive James' summary judgment motion.

The party moving for summary judgment "bears the initial responsibility of informing the district court of the basis for its motion, and identifying those portions of 'the pleadings, depositions, answers to interrogatories, and admissions on file, together with affidavits, if any,' which it believes demonstrate the absence of a genuine issue of material fact." Celotex, 477 U.S. at 323, 106 S.Ct. at 2553, 91 L.Ed.2d at 274. But if the nonmoving party will bear the burden of proof on the issue at trial, "the burden on the moving party may be discharged by 'showing'--that is, pointing out to the district court--that there is an absence of evidence to support the nonmoving party's case." Id. at 325, 106 S.Ct. at 2554, 91 L.Ed.2d at 275.

James satisfied his summary judgment burden by pointing out to the district court that there was no evidence in the record to support Esmark's claims that he converted company property, perpetrated a fraud on the company, participated in a conspiracy to misappropriate company property, or engaged in racketeering activity. James also highlighted portions of the summary judgment record, including his own affidavit, which tended to show that, in filling Maynard's orders, he performed his duties as production control manager in a proper fashion. The burden therefore shifted to Esmark to identify genuine issues of material fact to survive James' summary judgment motion.

B.

Esmark also argues that the district court erred in finding that no genuine issues of material fact remained regarding James' involvement in the alleged scheme. Esmark contends that it has developed sufficient circumstantial evidence for a jury to infer that James conspired with Tadin and Maynard to convert Esmark property and to misappropriate Esmark funds. Our task is to examine this circumstantial evidence and determine whether it supports such an inference.

In his deposition, Maynard testified that he had been an Esmark customer since 1974, and that Tadin was his principal contact at the company. Initially, the company sent Maynard an invoice for his hosiery purchases, which he paid by check. Maynard also was paying Tadin a cash kickback to ensure his access to certain hosiery styles. After taking delivery of an order in Grenada, Maynard would hand-deliver his kickback to Tadin in Memphis.

Tadin and Maynard later altered their arrangement. Tadin began intercepting James' memoranda so that Maynard would not receive invoices from the company, and Maynard began delivering cash payments to Tadin, which included the purchase price of his hosiery orders plus his usual kickback. This arrangement led to the inventory discrepancy which Esmark eventually discovered.

In his deposition, Maynard also testified that he occasionally purchased waste hosiery directly from James. James himself testified that whenever Maynard purchased waste hosiery Maynard paid with cash. James' superiors testified that James was authorized to receive cash under these circumstances.

Esmark maintains that the circumstantial evidence in the record raises an inference from which a jury could find that James conspired with Tadin and Maynard to convert company property and misappropriate company funds. Esmark argues first that only a small portion of the cash that James received from Maynard was ever...