Loughry v. Lincoln First Bank, N.A.

• Decision Date: 01 May 1986
• Parties: , 494 N.E.2d 70 Kenneth H. LOUGHRY, Respondent, v. LINCOLN FIRST BANK, N.A., Appellant, et al., Defendants.
• Court: New York Court of Appeals Court of Appeals

Page 965

502 N.Y.S.2d 965

67 N.Y.2d 369, 494 N.E.2d 70

Kenneth H. LOUGHRY, Respondent, v. LINCOLN FIRST BANK, N.A., Appellant, et al., Defendants.

Court of Appeals of New York.

May 1, 1986.

Robert C. Bernius and Thane D. Scott, Rochester, for appellant.

E. Robert Fussell, LeRoy, for respondent.

OPINION OF THE COURT

KAYE, Judge.

While an employer may be liable for compensatory damages caused by false statements maliciously published by its employees in the course of employment, punitive damages for the same acts cannot be assessed against the employer in the absence of its complicity. The employer's complicity not having been established here, the Appellate Division 109 A.D.2d 1074, 487 N.Y.S.2d 222 order allowing punitive damages against appellant, Lincoln First Bank, should be modified by striking the punitive damages award.

Plaintiff, first employed by Lincoln in 1975 as a loan collector, by 1979 had advanced to become a collection manager in the Consumer Credit Services Department, responsible for both debt collections and property repossession and disposition. His rise through the ranks was marked by several bank commendations.

At 5 p.m. on September 17, 1979, plaintiff was summoned to a meeting by Robert Mariano, a senior vice-president of the bank and manager of its Community Banking and Consumer Credit Services Departments, to discuss alleged improprieties uncovered in the course of an investigation conducted by defendants Robert Lee (a bank vice-president, manager of its Real Estate Division and Director of Security) and Frank Dovidio (an investigator in the Asset Protection Department of the bank's Security Department). Mariano, Lee and Dovidio were at the meeting and, at plaintiff's request, his immediate supervisor--Alan Stanwix--also attended.

Two statements were allegedly made at this meeting--one by Dovidio, and one by Lee--that became the focus of plaintiff's slander action. ¹ Defendants denied uttering either statement. First, plaintiff claims Dovidio stated, "I have enough against you for an indictment", then threw an envelope containing tinfoil packets on the table and demanded, "Come on Ken, you know what these are. Have you ever used cocaine?" Plaintiff responded by denying ever having used cocaine, but claims these words and actions falsely imputed crimes dealing with possession and sale of controlled substances. Second, plaintiff claims Lee falsely accused him of larceny at the meeting when he stated, "We know that you gave a truck to Charles Johnson for bringing back a car from out of state. We've verified that this truck is registered in the name of Chuck Johnson." Plaintiff explained that the truck had been repossessed in Texas, transported to New York free of charge by Charles Johnson, and sold to plaintiff's acquaintance for $800 above the value placed on it in Texas. While the file maintained on the truck was at the meeting, exculpatory documents setting forth the indicated value and the purchaser's name had been removed. In response to plaintiff's suggestion that his story could be verified, Lee allegedly responded: "We've got a statement saying that you gave this truck to Chuck Johnson. That's all we need."

At the conclusion of the meeting, Mariano said he would consider the matter overnight and, after viewing as well the written statements from other employees (see, n. 1, supra), the next day terminated plaintiff's employment on the ground the bank had lost confidence in him. The present action followed. Plaintiff claimed that defendants' slanderous statements resulted in his discharge and damaged his reputation in the banking community.

In a bifurcated trial, the jury first considered liability only, and found for plaintiff against all three defendants. Answering special questions, the jury found that Lee and Dovidio had made the statements attributed to them, that the statements were false, heard by other persons who reasonably understood them to disgrace or discredit plaintiff, uttered solely out of malice, and injurious to plaintiff. After additional proof and a separate charge on damages, the jury awarded plaintiff $55,000 in compensatory damages against Lee, Dovidio and the bank, and punitive damages totaling $133,000--$22,000 as to Lee, $6,000 as to Dovidio and $105,000 as to the bank. On a posttrial motion to set aside the jury's special findings and verdict (see, CPLR 4404[a] ), the trial court reduced compensatory damages to $35,500; reduced punitive damages against Lee and Dovidio to $10,000 and $3,000 respectively, crediting the excessive awards to "improper comments made by plaintiff's counsel during his summations"; and struck the punitive damages award against the bank, concluding that the individuals' assault on plaintiff's character and reputation were "spontaneous and unforeseeable by the superior officers of Lincoln", and that "[a]dequate monetary penalties were imposed on the parties responsible for the slanders." On appeal by plaintiff and cross appeals by defendants, the Appellate Division modified on the law and the facts, by reinstating the punitive damages award against Lincoln, reversing all findings of fact inconsistent with its memorandum and making new findings as contained in the memorandum, and otherwise affirmed. Quoting O'Donnell v. K-Mart Corp., (100 A.D.2d 488, 492 474 N.Y.S.2d 344), the court held that Lee, who was a bank vice-president, manager of its real estate department and director of corporate security, was a superior officer who " 'had sufficient managerial authority upon which to impose liability' " for punitive damages on Lincoln (109 A.D.2d, at p. 1075, 487 N.Y.S.2d 222). Alternatively, the court held that Lincoln had not included a "superior officer" charge in its request to charge and registered no objection to the charge given prior to submission of the case to the jury, thus failing to preserve its argument directed to Lee's status as a superior officer.

All three defendants appealed as of right, but this court dismissed the appeals of Lee and Dovidio because they were not aggrieved by the modification at the Appellate Division (65 N.Y.2d 811, 493 N.Y.S.2d 128, 482 N.E.2d 924), and denied their motions for leave to appeal. Plaintiff's cross motion for leave to appeal was dismissed on the ground that he was not aggrieved by a reduction in damages he stipulated to accept (66 N.Y.2d 677, 496 N.Y.S.2d 422, 487 N.E.2d 279).

While the Appellate Division modified the trial court's order only as to punitive damages, still the modification affords defendant the right to appeal from all aspects of the order that aggrieved it (see, Dalrymple v. Shults Chevrolet, 39 N.Y.2d 795, 385 N.Y.S.2d 756, 351 N.E.2d 423; Cohen and Karger, Powers of the New York Court of Appeals § 50, at 224 [rev ed] ). Lincoln challenges both its liability for compensatory damages and the punitive damages award.

The bank argues strenuously that the September 17 meeting was an example of corporate fairness and due process that should as a matter of policy be promoted not punished, that the statements were privileged, and that in any event the elements of slander were not established. However persuasive such contentions might be in the abstract, they are laid to rest by the record in this case. Statements among employees in furtherance of the common interest of the employer, made at a confidential meeting, may well fall within the ambit of a qualified or conditional privilege (see generally, Toker v. Pollak, 44 N.Y.2d 211, 219, 405 N.Y.S.2d 1, 376 N.E.2d 163; Stukuls v. State of New York, 42 N.Y.2d 272, 397 N.Y.S.2d 740, 366 N.E.2d 829; Shapiro v. Health Ins. Plan, 7 N.Y.2d 56, 194 N.Y.S.2d 509, 163 N.E.2d 333; Rezey v. Golub Corp., 73 A.D.2d 772, 423 N.Y.S.2d 535, affd. 52 N.Y.2d 713, 436 N.Y.S.2d 264, 417 N.E.2d 558; PJI 3:32 [1986 Cum.Supp.] ). But the privilege is conditioned on its proper exercise, and cannot shelter statements published with malice or with knowledge of their falsity or reckless disregard as to their truth or falsity (see, O'Rorke v. Carpenter, 55 N.Y.2d 798, 799, 447 N.Y.S.2d 434, 432 N.E.2d 136; Restatement [Second] of Torts §§ 599-600, 603 comment a; Prosser and Keeton, Torts § 115, at 833-835 [5th ed] ). Here, the jury found that the two subject statements were false, that Lee and Dovidio "solely from malice intend[ed] to injure plaintiff when [they] made the statements", that the statements were made "solely as a result of [the individuals'] malice toward plaintiff", and that they injured plaintiff. Where, as here, there is some evidence to support the jury's findings, they are beyond the scope of our review (see, Cohen and Karger, Powers of the New York Court of Appeals § 108 [rev. ed.] ).

Next, Lincoln challenges the compensatory damages award on the ground that, if the individual defendants were acting solely from malice they necessarily could not have been acting in the scope of their employment. But no such objection was taken to the charge either as to liability or as to compensatory damages, which therefore places the issue beyond our review (see, CPLR 4110-b). Indeed, the liability segment of the case was presented throughout as if the bank and each individual were to be viewed as one. While the court charged that the bank would be liable only for acts of its employees within the course of employment, the special findings forms prepared by defense counsel permitted the jury to return findings only as to the individuals and the bank jointly. No request was made to separate the individuals from the entity. In this posture, the bank cannot now complain of error (see, Up-Front Indus. v. U.S. Indus., 63 N.Y.2d 1004, 1006, 484 N.Y.S.2d 505, 473 N.E.2d 733; Bichler v. Lilly & Co., 55 N.Y.2d 571, 583-584, 450 N.Y.S.2d 776, 436 N.E.2d 182). Finally, Lincoln asserts that as a matter of law no publication was made. For purposes of a slander claim, however, it is clear that a false and malicious utterance by one employee...