Opinion
C.A. No. 07C-11-021 JTV.
Submitted: November 16, 2010.
Decided: February 16, 2011.
Upon Defendant's Motion for a New Trial, Remittitur or Judgment.
Granted in part; Denied in part.
William D. Fletcher, Esquire and Noel E. Primos, Esquire of Schmittinger and Rodriguez, P.A., Dover, Delaware; attorneys for the Plaintiffs.
Dominick Scioli, pro se.
ORDER
The jury found Defendant liable for tortious interference with contract and defamation (both libel and slander), and awarded $650,000 in damages to Plaintiffs. Defendant has filed post-trial motions seeking judgment as a matter of law, remittitur, or a new trial. He presents four theories: (A) the tortious interference with contract verdict is unsustainable as a matter of law; (B) the tortious interference with contract claim was not properly before the jury because it was not plead; (C) the defamation verdict is against the great weight of the evidence; (D) the compensatory and punitive damages were improperly combined into one undifferentiated award. Additionally, Plaintiffs have filed a motion for court costs and fees under Superior Court Rule Civil Rule 54. For the reasons discussed herein, Defendant's motion for a new trial is granted as outlined below.
Defendant lacks standing to bring a "renewed" motion for judgment as a matter of law because he failed to make an initial motion for judgment as a matter of law before the case was submitted to the jury. Peters v. Gelb, 314 A.2d 901 (Del. 1973).
This issue is moot since the Court has determined that there must be a new trial. The jury will be instructed to list compensatory and punitive damages separately upon retrial.
Plaintiffs' motion must be denied as moot in light of the Court's order granting a new trial.
FACTS
Rachel Pennington ("Pennington") and Kendra Todd ("Todd") (jointly "Plaintiffs"), worked together as a sales team at Synergy Direct Mortgage, Inc. (Synergy) from mid 2005 until November 2006. Plaintiffs were classified as independent contractors rather than employees. Dominick Scioli ("Defendant"), Synergy's chief executive officer, terminated Plaintiffs after an incident on November 22, 2006. The termination and its aftermath led to an action for defamation and intentional interference with contractual relations. The undisputed facts are as follows.
On November 22, 2006, Eric Glass, Synergy's chief operating officer, remotely monitored Pennington's use of her company computer. Glass testified that he was alarmed to discover that Pennington was violating company policy regarding data confidentiality by e-mailing "a substantial amount of files" to multiple email accounts. He testified that several of the email addresses appeared to belong to Pennington and Todd, but one email address appeared to belong to another mortgage company. Glass immediately informed Defendant of Pennington's activity. Two other Synergy officers, Mario Glover and Siobhen Merritt, were called into Defendant's office and informed of the incident. The Synergy officers conferred for between an hour and an hour and a half, and then Defendant called Pennington into his office. According to Glass, Defendant immediately asked Pennington why she had been "stealing from [him]." Glass testified that Pennington sat in shocked silence and offered no reply. Defendant terminated Pennington and, subsequently, Todd because he believed he had caught them in the act of stealing confidential company information.
Defendant mailed letters to clients who had worked with Plaintiffs. The letters state that he had fired Plaintiffs "for cause" for violating confidentiality, that a "cease and desist order had been issued," and legal action against Plaintiffs was "pending." The letters were not factually accurate. In fact, no cease and desist order had been issued and there was no pending legal action against Plaintiffs. It was also alleged that Defendant made oral statements to clients along the same lines as the letters.
PROCEDURAL HISTORY
Plaintiffs brought suit for defamation and intentional interference with contractual relations. Trial began on October 26, 2010. The jury returned a verdict for Plaintiffs. It granted $300,000 to Pennington and $350,000 to Todd. Defendant filed a Rule 59 motion for a new trial or remittitur. He also requested judgment as a matter of law.
Standard of Review
The Court may direct a new trial pursuant to Superior Court Civil Rule 59 in order to avoid injustice if it finds that a verdict has been compromised by legal error or that the verdict is against the great weight of the evidence.
See Storey v. Camper, 401 A.2d 458 (Del. 1979) (providing a historical analysis of the power of trial courts to grant a new trial).
DISCUSSION
A. There is no basis in law for the tortious interference with contract verdict
The tortious interference with contract claim should never have been presented to the jury because there is no evidence that Defendant's decision to fire Plaintiffs was improper. Delaware law has adopted the Second Restatement of Torts position on Intentional Interference with Contractual Relations. In order to recover, the plaintiff must show that the defendant's interference with a contract was both intentional and improper. A multi-factor analysis is generally applied in order to determine the propriety of a defendant's conduct. However, there are certain circumstances in which conduct is, as a matter of law, never improper.Section 770 provides a privilege for defendants who interfere with a contract in order to protect the welfare of a third party to whom they owe a duty. It applies when the defendant: (1) has a duty to protect the welfare of a third person, (2) has acted in order to protect the third person, and (3) has not employed wrongful means. These elements will be treated in turn.
Restatement (Second) of Torts § 770. Defendant relies on Avins v. Moll for a similar proposition. Avins is a federal case, which found that a corporate officer cannot be personally liable for interfering with a contract between his corporation and an employee unless he acts with "actual malice." Avins v. Moll, 610 F. Supp. 308, 318 (E.D. Pa. 1984). However, Defendant overstates the case. There is no authority for the proposition that a corporate officer is absolutely immune from personal liability when he has fired an at will employee. See ASDI v. Beard Research, Nos. 296/301/308 (consolidated), (Del. Nov. 23, 2010) (holding that a claim for tortious interference with contractual relations focuses on the wrongfulness of the defendant's conduct regardless of whether the termination is legally justified).
Restatement (Second) of Torts § 770.
The first element is easily satisfied because Defendant was the CEO of Synergy. He had duties of loyalty and diligence to the corporation. Naturally, those duties would require him to take action if he suspected that employees were expropriating confidential corporate information.
The second element is also easily satisfied. Under Delaware Law, it is presumed that a corporate officer who has interfered with a contract involving his corporation has acted in order to benefit the corporation. Plaintiffs bear the burden of overcoming that presumption by a preponderance of the evidence. In this case, the record overwhelmingly shows that Defendant decided to terminate Plaintiffs because he believed, perhaps incorrectly, that they were stealing confidential corporate information. Defendant began to investigate Plaintiffs after Glass, Synergy's chief operating officer, informed him that Plaintiffs appeared to be violating company policy by emailing confidential information. He conferred with Glass and two other Synergy officers for between and hour and an hour and a half, during which time Defendant continued to monitor Pennington's activity. Defendant finally became convinced that Plaintiffs were stealing, and he fired them. The action, however extreme, is consistent with Defendant's presumed intent to protect the corporation.
Great Ventures, Inc. v. Raoli's Restaurant, Inc., 1996 WL 30022 at *4.
Id.
Plaintiffs have not introduced evidence to demonstrate an ulterior motive. Rather, their theory seems to be that Defendant's conduct was improper because it did not benefit the corporation to terminate highly productive employees who were completely innocent of the alleged data theft. To that end, they have offered evidence to show that Defendant's decision to fire them was a rash mistake, if not, in fact, stupid. Plaintiffs' theory is unavailing. As far as this element is concerned, all that matters is whether Defendant acted with the purpose or intent of benefitting the corporation. It does not matter whether, in hindsight, the decision actually benefitted the corporation. In conclusion, Plaintiffs have failed to rebut the presumption that Defendant's decision to terminate their employment was done for the benefit of the corporation.
The third element limits the application of the privilege to those defendants who have not exploited "wrongful means" when interfering with a contract. Wrongfulness is determined by recourse to a multi-factor balancing test, which considers: "the extent of the danger threatened to the welfare of the person induced, the relation between him and the actor, and the consequent extent of the actor's interest." These factors will be considered in turn.
Restatement (Second) of Torts § 770 (1979).
The theft of confidential information presented a threat to Synergy. The record shows that Defendant believed (however mistakenly) that Plaintiffs were absconding with confidential corporate information. He testified that he feared that the information would be delivered to competitors who could use it to woo customers away from Synergy. Glass testified that he had the same concern. He noted that one of the e-mail recipients appeared to be another mortgage company. The Synergy officers may have been mistaken about Plaintiffs' motives. However, it is difficult to maintain that the theft of confidential client information could not have harmed the company.
Defendant was Synergy's chief executive officer. As an officer, he owed fiduciary duties to the corporation. A fiduciary has a responsibility to protect the welfare of the one to whom his duty is owed. It follows that Defendant had a powerful reason to take some sort of action if he believed that Plaintiffs were actively harming the corporation.
See Meinhard v. Salmon, 164 N.E. 545 (N.Y. 1928) (providing Chief Judge Cardozo's famous exposition on fiduciary duties).
The ultimate factor considers the proportionality of Defendant's action in defense of the corporation to the gravity of the threatened harm. As previously noted, the theft of confidential client information could have been harmful to Synergy. The information might have been used to steal clients. More ominously, the personal information contained within clients' mortgage applications might have been used to defraud the clients. That eventuality might, at the very least, create a public relations fiasco for the corporation.
Defendant dealt with the suspected data theft by firing Plaintiffs and sending letters advising clients that Plaintiffs no longer represented Synergy. It may have been unfair and unwise to summarily fire Plaintiffs based on a series of questionable emails observed over a one hour period. Yet, the action was reasonably calculated to prevent Plaintiffs from absconding with confidential information. Plaintiffs permanently lost access to Synergy's confidential information at the moment they were terminated. Defendant's subsequent client letters further protected Synergy by eliminating the danger posed by Plaintiffs' lingering apparent authority.
In conclusion, Defendant's decision to fire Plaintiffs may have been unwise and extreme, but it was not improper or wrongful. A manager should not be faulted for terminating employees who he suspects of attempting to steal confidential information. This conclusion is bolstered by the fact that Defendant only made the decision after personally observing Pennington's conduct through his virtual monitoring system and conferring with Glass. Under the circumstances, the jury could not reasonably have found that Defendant's conduct was improper. The Court finds that the verdict for Intentional Interference with Contractual Relations is against the great weight of the evidence. In fairness to the jury, the claim should never have been submitted, especially without a special instruction capturing the essence of Section 770.
For the foregoing reasons, the Court holds that a new trial of the intentional interference claim is necessary in order to avoid manifest injustice. The parties may wish to submit the issue for summary adjudication in light of the Court's finding that Defendant's conduct was not improper as a matter of law.
B. Whether the tortious inference with contract claim was properly plead
C. Whether the record supports the defamation verdict
Storey, 401 A.2d at 465(Del. 1979) (holding that the Delaware Constitution requires deference to civil jury verdicts that are supported by the record).
See Spencer v. Funk, 396 A.2d 967, 969 (Del. 1974); See also New York Times Co. v. Sullivan, 376 U.S. 254, 268 (1964) (proclaiming the Constitutional requirement that defamation claims be supported by a finding of fault).
A communication is defamatory when it has a tendency to lower the esteem in which a person is held by the community. Here, Defendant mailed letters stating that Plaintiffs had been terminated "for cause," that a "cease and desist order had been issued," and that legal action against Plaintiffs was "pending." The communication is defamatory because it clearly implies that Plaintiffs had been fired for illegal wrongdoing or incompetence. There is no dispute that the letters were actually received or that the recipients failed to understand them.
Spencer v. Funk, 396 A.2d 967, 969 (Del. 1974).
Defendant maintains that he should not be held liable because the communications were true. However, the letters were not factually accurate. In fact, no cease and desist order had been issued and there was no pending legal action against Plaintiffs.
Defendant further maintains that Plaintiffs failed to show that they suffered any damages since they both obtained new jobs in the mortgage industry. However, a defamation plaintiff may recover for presumed general damages ( i.e. damage to his or her reputation). General damages are presumed in libel claims, and in cases of slander per se. Slander per se exists where a defamatory communication asserts, inter alia, that plaintiff engaged in an illegal act or that he is incompetent in his profession. Here, the letters qualify for presumed general damages under libel because they were written. It was also alleged that Defendant made oral statements to clients along the same lines as the letters, and the jury apparently credited that allegation. The oral statements qualify for presumed general damages as slander per se because they suggest that Plaintiffs had engaged in illegal activity or were incompetent regarding the protection of confidential information.
Id. at 970.
Id.
Finally, a private plaintiff can recover for defamation only when the defendant was at least negligent as to the truth or falsity of the defamatory communication. Here, Defendant was not merely careless or negligent as to the truth or falsity of the statements. He knew that he had not obtained a "cease and desist order" against Plaintiffs. He also knew that he had not brought any legal action against them. Nonetheless, Defendant recklessly mailed letters containing the defamatory communications.
See Gertz v. Robert Welch, Inc., 418 U.S. 323, 347-48 (1974).
There is no basis for overturning the jury's verdict on the defamation claim. Unfortunately, the jury was permitted to enter one combined amount of damages for Plaintiffs' defamation and intentional interference claims. Thus, it is impossible to determine what percentage of the damages were intended to cover the defamation claim as opposed to the unsupportable intentional interference with contract claim. The jury could have intended to award $1 or $650,000 for defamation. There is no way to tell.
Thus, it is necessary to conduct a new trial on the limited issue of damages. The Court may order retrial on a limited issue when: (1) the issue to be retried is clearly severable from the other issues, and (2) no injustice will result from limiting the issue on retrial.
Chilson v. Allstate Ins. Co., 979 A.2d 1078, 1083-84 (Del. 2009).
In this case, the issues are clearly severable because the jury has already determined liability. There is no reason to upset that verdict. A new trial on the limited issue of damages will promote justice without prejudicing either party. Plaintiffs will be entitled to present their entire case to a jury in order to prove damages. Defendant is not prejudiced by retrial of the limited issue of damages because he has already had a full and fair opportunity to contest liability. This retrial presents him with the opportunity to convince the jury that Plaintiffs are entitled to only nominal damages.
CONCLUSION
Defendant's motion for a new trial is GRANTED. A new trial will be held to resolve: (1) the intentional interference with contractual relations claim, and (2) the limited issue of damages for defamation.IT IS SO ORDERED.