Sigal Construction Corp. v. Stanbury
586 A.2d 1204, 1991 D.C. App. LEXIS 31, 6 I.E.R. Cas. (BNA) 201 (1991)
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Rule of Law:
An employer's qualified privilege for communications made in an employment reference is abused, and liability for defamation may arise under respondeat superior, when an employee makes defamatory statements of fact with reckless disregard for their truth by relying on unverified rumors and misrepresenting their basis of knowledge.
Facts:
- Kenneth S. Stanbury was employed as a project manager for Sigal Construction Corporation from May 1984 until his termination in June 1985.
- Sigal told Stanbury he was terminated due to a 'lack of work,' but internal records indicated it was for performance reasons.
- Stanbury later received a job offer from Daniel Construction, which was contingent upon a positive reference check by the project owner, Lincoln Properties.
- William Janes of Lincoln Properties contacted Sigal for a reference and was directed to Paul Littman, a Sigal project executive.
- Littman told Janes that Stanbury was 'detail oriented to the point of losing sight of the big picture' and suggested his termination from Sigal was a negative reflection on his performance.
- Littman had never supervised, formally evaluated, or worked directly with Stanbury.
- Littman's negative statements were based on unverified secondhand information he described as office 'gossip' or comments heard at 'casual luncheons' or 'over a beer'.
- Janes testified that Littman led him to believe he had worked with Stanbury on a project, giving the impression of firsthand knowledge.
- Following Littman's reference, the job offer to Stanbury was rescinded.
Procedural Posture:
- Kenneth S. Stanbury filed a lawsuit against Sigal Construction Corporation in the Superior Court of the District of Columbia (trial court), alleging defamation and other claims.
- The trial court denied Sigal's motion for summary judgment.
- At trial, the court granted a directed verdict for Sigal on Stanbury's negligence and breach of contract counts.
- A jury returned a verdict for Stanbury on the defamation claim, awarding him $370,440.
- The trial court denied Sigal's post-trial motion for judgment notwithstanding the verdict (JNOV) or a new trial.
- The trial court granted Sigal's motion for remittitur, conditioning the denial of a new trial on Stanbury's acceptance of a reduced award of $250,000, which Stanbury accepted.
- Sigal (appellant) appealed the judgment to the District of Columbia Court of Appeals, and Stanbury (appellee) filed a cross-appeal challenging the remittitur.
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Issue:
Does an employee's defamatory statement in an employment reference, based on unverified rumor and made with reckless disregard for the truth, abuse the employer's qualified privilege and subject the employer to liability under the doctrine of respondeat superior?
Opinions:
Majority - Ferren, Associate Judge
Yes, an employee's defamatory statement made with reckless disregard for the truth abuses the employer's qualified privilege, subjecting the employer to liability. The court held that Littman’s statements were actionable assertions of fact, not constitutionally protected opinion, because in the context of an employment reference, a phrase like 'losing sight of the big picture' is a verifiable statement about professional competence. While such communications are typically protected by a qualified privilege, that privilege was abused. Littman acted with 'common law malice'—defined under Virginia law as 'such gross indifference or recklessness as to amount to a wanton or wilful disregard of the rights of the plaintiff'—by conveying unverified rumors as fact, failing to disclose his lack of firsthand knowledge, and actively misleading the prospective employer about his experience with Stanbury. Finally, Sigal was liable under the doctrine of respondeat superior because a jury could reasonably find Littman acted with implied or apparent authority, as it was customary in the construction industry for a project executive to provide such references.
Analysis:
This decision significantly clarifies the boundaries of the qualified privilege that protects employers when giving employment references. It serves as a strong caution that the privilege is not absolute and can be defeated by a showing of reckless disregard for the truth. The case establishes that relying on unverified office gossip or rumor, without disclosure or investigation, meets the standard for malice necessary to abuse the privilege. For future cases, this holding places a greater burden on employers to implement clear policies for providing references, ensuring they are given only by individuals with direct knowledge and are based on documented facts, to avoid vicarious liability for defamation.
