Paine Webber Jackson and Curtis, Inc. v. Winters

• Decision Date: 04 October 1990
• Docket Number: No. 8127,8127
• Citation: 22 Conn.App. 640,579 A.2d 545
• Court: Connecticut Court of Appeals
• Parties: PAINE WEBBER JACKSON AND CURTIS, INC. v. Geoffrey J. WINTERS.

Page 545

579 A.2d 545

22 Conn.App. 640

PAINE WEBBER JACKSON AND CURTIS, INC. v. Geoffrey J. WINTERS.

No. 8127.

Appellate Court of Connecticut.

Argued April 20, 1990.

Decided Aug. 21, 1990.

Certification Denied Oct. 4, 1990.

Alan R. Spirer, with whom was Jan A. Marcus, Westport, for appellant (plaintiff).

John H. Chapman, with whom, on the brief, was Brian E. Moran, Stamford, for appellee (defendant).

Before SPALLONE, NORCOTT and LAVERY, JJ.

SPALLONE, Judge.

After remand by this court, the trial court rendered judgments upon jury verdicts for the plaintiff on claims of breach of contract and for the defendant on various counterclaims. On appeal, the plaintiff challenges the trial court's (1) instructions to the jury on the New York law defining an employer's responsibility for the intentional torts of its agents, (2) failure to direct a verdict or set aside the verdict on the counterclaim of defamation on the ground of insufficient evidence, and (3) denial of interest on the amount awarded in the breach of contract judgment which exceeded Paine Webber's pretrial offer of judgment. The plaintiff's claims attacking the verdict on the defamation counterclaim are unpersuasive, but we agree with its claim for interest.

The plaintiff, a New York brokerage corporation, engaged the defendant, Geoffrey Winters, a successful stockbroker, as a managing director in September, 1982. As consideration for joining the firm, the defendant received an interest free loan of $300,000 secured by two promissory notes due at the end of five years. This "loan" was essentially a sign-on bonus; neither party contemplated repayment if Winters remained in the plaintiff's employ for five years.

The defendant was, however, fired by the plaintiff in March, 1984, for willful misconduct and impaired financial responsibility. Under the terms of the notes, termination for those reasons was a ground upon which the plaintiff could elect to accelerate the debt. Accordingly, it demanded immediate repayment and brought suit in Connecticut when the defendant, a state resident, refused to repay the loan. The defendant asserted twelve counterclaims, including an allegation that after he was fired, the plaintiff's employees made false and defamatory statements about him to his clients.

The plaintiff filed a timely offer of judgment, offering to settle its claims on the notes for $295,000. The defendant did not respond to this offer or make his own offer of judgment on his counterclaims. The plaintiff was subsequently awarded summary judgment on its claims in February, 1986. On the defendant's appeal, the judgment was set aside by this court on the ground that the trial court had impermissibly resolved issues of fact. See Paine Webber Jackson & Curtis, Inc. v. Winters, 13 Conn.App. 712, 722, 539 A.2d 595, cert. denied, 208 Conn. 803, 545 A.2d 1101 (1988).

On remand, the trial court, on the bases of express terms in the promissory notes, the loci of the contracts and the allegedly tortious acts, determined that New York law would apply to all claims and counterclaims. Neither party challenged this decision at trial or on appeal. The court subsequently instructed the jury on the New York law governing an employer's liability for acts of employees and agents.

The jury returned a verdict for the plaintiff on the debt and awarded it $440,000 in damages, costs and fees. The jury also returned a verdict for the defendant on five of his counterclaims, awarding a total of $440,000.18, ¹ including an award of $300,000 on the counterclaim for defamation. The court rendered separate judgments on the verdicts in May, 1989, and denied the plaintiff's motions to set aside the defendant's verdict and for interest on the breach of contract award which recovery exceeded its offer of judgment. This appeal ensued.

I

The plaintiff's first two claims challenge the jury verdict on the defendant's counterclaim for defamation. The plaintiff asserts that it should not have been held liable for an unidentified employee's intentional torts, acts it neither authorized nor ratified. The plaintiff claims (1) that the court's jury instructions misstated the applicable New York law, and (2) that there was insufficient evidence presented to establish its liability. Both claims are without merit.

The defendant's counterclaim for defamation, slander and libel was based on allegations that the plaintiff's executives made false statements to the defendant's clients implying that he had engaged in unlawful activities or unauthorized stock trading. Ebon Alabastur, a long-standing client of the defendant, testified to the principal defamatory acts. He related conversations with the plaintiff's executives after the defendant's discharge. Alabastur first was called by a Mr. Kaufman, the executive who had fired the defendant, and was falsely informed that the defendant "was probably no longer in business because he had litigation pending against him." Alabastur subsequently was called by the plaintiff's account executive who had been assigned to manage his portfolio. That individual read and later mailed to Alabastur the text of a published article containing the false implication that the defendant, among other brokers, had lost two million dollars of client funds through questionable stock trades.

A

The jury was instructed that the plaintiff could be held liable for an employee's torts if the employee acted within the scope of his employment, in furtherance of the employer's business, and if such conduct was generally foreseeable. Both parties concede that the jury charge expresses the common law doctrine of respondeat superior to define the circumstances in which a master may be held responsible for a servant's acts. The plaintiff argues that, in the case of intentional torts, New York has departed from the common law standard to require proof of bad faith or actual complicity in the employee's conduct before liability can be imposed on the employer. We do not agree.

The plaintiff asserts that "[s]lander is an intentional tort and is not normally within the scope of anyone's employment or authority." Gerard, Inc. v. May & Co., 51 Misc.2d 711, 712, 273 N.Y.S.2d 888 (1966). " 'If principals or masters could be held liable for every defamatory utterance of their servants or agents while in their service, it would subject them to liability that they could not protect or guard against.... It would be entirely out of the question to hold the principal or master responsible for every reckless, thoughtless, or even deliberate speech made by his agent or servant ... while in the service of his principal or master.' " O'Brien v. B.L.M. Bates Corporation, 211 App.Div. 743, 746-47, 208 N.Y.S. 110 (1st Dept.1925). The plaintiff argues that under the proper New York standard, "[a]n employer who is acting in good faith and who has not induced an employee to commit an intentional tort is not liable for the employee's acts." Banque Worms v. Luis A. Duque Pena E Hijos, Ltda., 652 F.Supp. 770, 773 (S.D.N.Y.1986).

Contrary to the plaintiff's assertions, we conclude that New York continues to apply the doctrine of respondeat superior to tort liability and that the trial court correctly instructed the jury on the elements of the doctrine as expressed in the landmark case of Riviello v. Waldron, 47 N.Y.2d 297, 391 N.E.2d 1278, 418 N.Y.S.2d 300 (1979). The test for employer liability is " ' "whether the act was done while the servant was doing his master's work, no matter how irregularly or with what disregard of instruction." ' " Id., at 302, 391 N.E.2d 1278, 418 N.Y.S.2d 300. If generally foreseeable, even intentional torts may fall within the scope of employment. Id., at 304, 391 N.E.2d 1278, 418 N.Y.S.2d 300; see also Murray v. Watervliet School District, 130 App.Div.2d 830, 515 N.Y.S.2d 150 (1987).

The plaintiff misconstrues the holdings of his cited authorities, cases that we conclude are consistent with the principles of Riviello. In Ogust v. Institute for Public Service, 216 App.Div. 118, 214 N.Y.S. 662 (1926), the complaint of slander was dismissed because the defamatory letter was signed by the institute's director personally, not in his executive capacity. In Gerard, Inc. v. May & Co., supra, the court dismissed a slander action only because there were no facts alleging that the employee acted with express, implied or apparent authority. The court in O'Brien v. B.L.M. Bates Corporation, supra, dismissed the complaint of slander because the assistant manager of the hotel was acting independently and not in furtherance of hotel business. "[T]here is no doubt that a corporation may be held liable for slander [when agents act] within the actual or implied scope of their employment." Id., 211 App.Div. at 744, 208 N.Y.S. 110. Finally, the defendant in Banque Worms v. Luis A. Duque Pena E Hijos, Ltda., supra, was charged with violating federal, not New York, law. The standard of employer liability quoted by the plaintiff is not New York law but rather the statutory standard for violations of the federal Securities Exchange Act. See also Essig v. United States, 675 F.Supp. 84, 90 (E.D.N.Y.1987) (New York substantive law follows doctrine of respondeat superior); Moscarelli v. Stamm, 288 F.Supp. 453, 460-61 (E.D.N.Y.1968) (distinguishing the federal standard from New York's common law standard of employer liability).

The doctrine of respondeat superior focuses on the employee's conduct rather than on the employer's knowledge or approval of the acts. If the employee acted with apparent authority in furtherance of employer business, the employer's consent or ratification of the misconduct is irrelevant to determining compensatory damages; even an innocent employer must compensate an injured party. The jury here was correctly instructed in accordance with New York law that the plaintiff's lack of good faith or complicity in its employees' acts were relevant only to the determination of...