Ross v. Duke

• Decision Date: 07 December 1976
• Docket Number: CA-CIV,No. 1,1
• Parties: A. Glynn ROSS, Appellant, v. R. G. DUKE, Appellee. 2952.
• Court: Arizona Court of Appeals

Page 240

569 P.2d 240

116 Ariz. 298

A. Glynn ROSS, Appellant, v. R. G. DUKE, Appellee.

No. 1 CA-CIV 2952.

Court of Appeals of Arizona, Division 1, Department A.

Dec. 7, 1976.

Rehearing Denied Jan. 4, 1977.

Review Denied Jan. 25, 1977.

Cavness & DeRose by Jack C. Cavness, Phoenix, for appellant

Harrison, Myers & Singer, P.C. by Mark I. Harrison, Phoenix and Kenneth P. Clancy, Phoenix, for appellee.

OPINION

OGG, Judge.

We are here dealing with a defamation action that arose in the setting of a contested union election. The appellant/plaintiff A. Glynn Ross filed an action claiming the appellee/defendant R. G. Duke libeled Ross by publishing certain audit reports. These reports were critical of the manner in which Ross, as secretary and treasurer of Local 640 of the International Brotherhood of Electrical Workers, managed the business affairs of the union. The audit reports were prepared by certified public accountants William G. Farrow and R. Dale Hershey, doing business as Gallant, Farrow & Co., P.C.

Ross filed suit against the accountants and Duke. The trial court granted a directed verdict to the accountants who prepared the audit. That judgment was affirmed by this court in the case of Ross v. Gallant, Farrow & Co., P.C., 27 Ariz.App. 89, 551 P.2d 79 (1976). In that case this court found the accountants could assert a qualified privilege as to the contents of their audit report and that Ross had failed to show there was any malice in these reports or that the reports had been released in reckless disregard of the truth or falsity of the contents of the reports.

The action against Duke was tried before a jury and ended in a verdict for Ross in his defamation claim against Duke. The trial court set aside the jury verdict and granted judgment N.O.V. in favor of Duke. It is from this order and judgment N.O.V. that Ross now brings this appeal.

The pivotal issues raised in this appeal are as follows:

1. Is the subject matter of the Ross defamation claim pre-empted by federal law?

2. Was Duke protected by an absolute or conditional privilege in his release of the allegedly defamatory audit reports?

A brief statement of the facts is necessary to put this case in proper perspective. In March, 1972, three members of the Local Union # 640 International Brotherhood of Electrical Workers, AFL-CIO, filed charges with Duke, the union's international vice-president, alleging that plaintiff Ross, in his position as financial secretary-business manager of Local # 640, had made improper expenditures of union funds. In May, 1972, three men bringing the charges ran against Ross and his slate of officers in a union election in an attempt to replace Ross as the financial secretary-business manager of Local # 640. The ballots were counted in June and Ross and his slate of officers were re-elected. Ross contends that the complaints and the subsequent investigation were instituted in an attempt to defeat his bid for re-election.

Pursuant to his duties as international vice-president of IBEW Duke investigated the charges, conducted an audit by the accounting firm of Gallant, Farrow & Co., and appointed a hearing officer to conduct hearings on the charges. Following a review of the union's by-laws and constitution and an examination of the financial records the accounting firm sent reports to Duke that questioned certain expenditures from union funds made by Ross. It was the opinion of the accountants that specific expenditures had been made that were not properly authorized or documented in the minutes of the local union.

Upon receiving these audit reports Duke examined them and then sent copies to Ross and the other charged parties, as well as sending copies to the three charging parties and to a hearing officer Duke appointed to investigate the charges. Ross contends that Duke maliciously mailed copies of these reports to the Ross opponents on May 2, 1972, just one month prior to the election.

All three CPAs who testified at the trial agreed that Duke was fully justified in relying on the truthfulness of the allegedly libelous audit reports.

To prove malice in the case Ross relied upon the fact that over a period of years Duke and Ross had disagreed on many union matters and that there was not a friendly relationship between the two men. Since Ross claimed that Duke was biased, another hearing officer was appointed to conduct the hearing. This hearing officer concluded that Ross was innocent of any wrongdoing and made a report to Duke. Duke reviewed the recommendation of the hearing officer, consulted with counsel and then dismissed all charges against Ross in August, 1972.

IS DEFAMATION CLAIM PRE-EMPTED BY FEDERAL LAW

In granting defendant Duke's motion for judgment N.O.V. the trial court listed several reasons in support of such judgment. Among the pertinent reasons listed were the court's finding that federal laws have pre-empted any relief by state courts in defamation actions of this kind.

The courts and Congress recognize that the entire field of labor relations requires special legislation and treatment. The task of regulating union activities was entrusted to the National Labor Relations Board. In 1959 Congress enacted the Labor-Management Reporting and Disclosure Act, 29 U.S.C. § 401, et seq. That statute (LMRDA), placed the federal government in the field of regulating the internal affairs of unions, including the manner in which they conduct union elections. In the case of San Diego Building Trades Council v. Garmon, 359 U.S. 236, 79 S.Ct. 773, 3 L.Ed.2d 775 (1959), the United States Supreme Court held that states may not regulate activities that are arguably subject to the National Labor Relations Act except where violence or coercive conduct is involved. See Garner v. Teamsters Local 776, 346 U.S. 485, 74 S.Ct. 161, 98 L.Ed. 228 (1953). The Garmon doctrine was followed by the Arizona Supreme Court in Oss v. Birmingham, 97 Ariz. 242, 399 P.2d 655 (1965), in a defamation action brought by a contractor against officers of a union local. The Arizona Supreme Court held that the alleged defamation was arguably an unfair labor practice and was therefore within the exclusive jurisdiction of the National Labor Relations Board and that the issues had been preempted from consideration by the state courts.

The United States Supreme Court modified the Garmon decision as applied to defamation actions in Linn v. Plant Guard Workers Local 114, 383 U.S. 53, 86 S.Ct. 657, 15 L.Ed.2d 582 (1966). In Linn the Court held that a state court can hear libel cases in labor matters "(P)rovided it is limited to redressing libel issued with knowledge of its falsity, or with reckless disregard of whether it was true or false." Id. at 61, 86 S.Ct. at 662, 15 L.Ed.2d at 589. The Linn decision reasoned that a state's concern with redressing malicious libel is so deeply rooted in local feeling and responsibility that it should be treated as an exception to NLRB's exclusive jurisdiction.

In Old Dominion Branch No. 496 National Association of Letter Carriers v. Austin, 418 U.S. 264, 94 S.Ct. 2770, 41 L.Ed.2d 745 (1974), the Court followed Linn and definitively limited Garmon by holding "(t)hat libel actions under state law were pre-empted by the federal labor laws...