Le Marc's Management Corp. v. Valentin
Le Marc's Management Corp. v. Valentin
Opinion of the Court
This case concerns the appropriate standard, under Maryland common law, for the allowance of punitive damages in defamation actions.
In late 1987 Francisco Valentin, having lived all but the first year of his life in Puerto Rico, moved to New York City in the hopes of improving his limited mastery of the English language and in search of better job opportunities. He immediately went to work as a stock room clerk at Le Marc’s Fifth Avenue Cards, Inc., a Hallmark card store owned by Le Marc’s Management Corp.
Valentin testified that on June 6,1988, he submitted a letter of resignation to and received a letter of recommendation from his manager, John Cefai. His original letter of resignation was not introduced into evidence and, apparently, has never been found. Sauer testified that it was not in Valentin’s personnel file, and Valentin testified that he did not make a copy of the letter for his records. Valentin further testified that the letter stated that he was leaving Le Marc’s because he was planning to move to Maryland to pursue a college education.
Once Valentin relocated to Maryland, he was employed as a sales trainee at a furniture store until July 1989 when he applied for and was hired as a teller-trainee for Sovran Bank. With Valentin’s permission, the Bank mailed reference requests to his former employers. Upon Le Marc’s receipt of the request, Sauer consulted his computer database and returned the reference form to the Bank stating that Valentin was “terminated due to pilferage.” The Bank then placed Valentin on suspension and told him that he had four days to clear his record or he would permanently lose his job.
Valentin immediately telephoned Sauer and explained his dilemma. Sauer promised to investigate the matter and to call the Bank immediately if he discovered that there was an error in the reference. The following day, Valentin traveled to New York in order to meet with Sauer in person. Upon learning that Valentin was waiting to see him, Sauer testified that he read Valentin’s employment file and determined that Valentin had not been terminated for pilfering and that the original reference was in error.
Sauer testified that he telephoned the Bank and spoke to Sheila Balog in the Bank’s personnel department; he also testified that he sent the Bank a letter correcting the original erroneous reference to which he attached the above described document. The letter that Sauer sent, purporting to correct the first reference, stated in pertinent part: “Thus Francisco’s reason for termination was stated incorrectly due to human error. Our physical file on Francisco does not reflect a pilferage situation directly with him. Please strike from the record this reason for termination.”
Balog testified that she had no recollection of any conversation with Sauer, nor did she remember Valentin’s specific situation. She did testify, however, that the statements in the letter and the attached document did not clear Valentin’s name. Rather, she testified, the letter and the attached document cast doubt on Valentin’s “credibility,” indicated that he was “covering [something] up,” and had told the Bank a “half truth.”
On September 18, 1989, the Bank terminated Valentin for falsifying his employment application and indicated that he was ineligible for future employment.
The case was retried solely on the issue of punitive damages. The jury was properly informed that the standard of proof for the allowability of punitive damages is clear and convincing evidence. The jury also received, inter alia, the following instruction:
“Malice exists, one, when the person making the statement deliberately lies or makes the statement with knowledge that it is false or with reckless disregard as to its truth or falsity or, two, when the person making the statement had an obvious reason to distrust either the accuracy of the statement or the source from which the person learned of the statement or, finally, item three, when the statement is invented by the person making it or is so inherently improbable that only a reckless person would say, write, or print it.”
The jury returned an award of punitive damages for Valentin in the amount of $700,000.
Le Marc’s argues that the trial court’s jury instruction permitted the award of punitive damages under a standard no longer consistent with Maryland law. Specifically, it asserts that the above-quoted instruction does not meet the standard for the allowability of punitive damages set forth in Owens-Illinois v. Zenobia, 325 Md. 420, 601 A.2d 633 (1992), and its progeny. Not surprisingly, Valentin argues that the proper standard was used. He maintains that the trial court’s instruction was consistent with the standard set forth in our prior opinions in defamation cases.
In New York Times Co. v. Sullivan, 376 U.S. 254, 84 S.Ct. 710, 11 L.Ed.2d 686 (1964), and Curtis Publishing Co. v. Butts, 388 U.S. 130, 87 S.Ct. 1975, 18 L.Ed.2d 1094 (1967), the Supreme Court held that the First Amendment prohibits a public official or public figure from recovering damages for a defamatory falsehood unless the plaintiff first establishes, by clear and convincing evidence, that the defendant acted with “actual malice,” defined as “knowledge that it was false or with reckless disregard of whether it was false or not.” In Gertz v. Robert Welch, Inc., 418 U.S. 323, 94 S.Ct. 2997, 41 L.Ed.2d 789 (1974), a defamation case involving a private plaintiff, a media defendant, and a matter of public concern, the Supreme Court held that, in such an action, the First
In a series of cases decided shortly thereafter, this Court held as a matter of Maryland common law, inter alia, that, in any defamation action, regardless of a party’s status or the subject matter, punitive damages are allowable only if the plaintiff proves that the defamatory statement was made with knowledge of its falsity or with reckless disregard for the truth. We held that actual malice in the sense of ill-will, spite, hatred, or intent to injure, would not suffice to support an award of punitive damages in any defamation action. See Marchesi v. Franchino, 283 Md. 131, 387 A.2d 1129 (1978); General Motors Corp. v. Piskor, 277 Md. 165, 175, 352 A.2d 810, 817 (1976); Jacron Sales Co. v. Sindorf, 276 Md. 580, 350 A.2d 688 (1976).
Subsequently, in Owens-Illinois v. Zenobia, supra, 325 Md. at 460, 601 A.2d at 652, a products liability action based on strict liability and § 402A of the Restatement (Second) of Torts, we held that generally punitive damages may only be awarded if “the plaintiff has established that the defendant’s conduct was characterized by evil motive, intent to injure, ill-will, or fraud, i.e., ‘actual malice.’ ” Furthermore, we held that, for punitive damages to be recoverable in a product liability action, the plaintiff is required to prove, by clear and convincing evidence, that the defendant had actual knowledge of the defect in the product and that, “armed with this actual
Following Zenobia, this Court has consistently required that punitive damages only be awarded based on the defendant’s conscious wrongdoing. Thus, in Montgomery Ward v. Wilson, 339 Md. 701, 733, 664 A.2d 916, 932 (1995), involving punitive damages in malicious prosecution and false imprisonment actions, we stated that
“in a number of recent decisions this Court has clarified and modified the standards for the allowability of punitive damages in tort cases. With respect to both intentional and non-intentional torts, we have held that an award of punitive damages generally must be based upon actual malice, in the sense of conscious and deliberate wrongdoing, evil or wrongful motive, intent to injure, ill will, or fraud. See, e.g., Ellerin v. Fairfax Savings, 337 Md. 216, 652 A.2d 1117 (1995); Komornik v. Sparks, 331 Md. 720, 725, 629 A.2d 721, 723 (1993); Owens-Illinois v. Zenobia, supra, 325 Md. at 454, 601 A.2d at 649-650. See also Alexander v. Evander, 336 Md. 635, 650 A.2d 260 (1994).”
See also, e.g., Scott v. Jenkins, 345 Md. 21, 690 A.2d 1000 (1997) (battery and false arrest); ACandS v. Asner, 344 Md. 155, 686 A.2d 250 (1996) (product liability); Owens-Corning v. Garrett, 343 Md. 500, 682 A.2d 1143 (1996) (negligence and strict liability); ACandS v. Godwin, 340 Md. 334, 667 A.2d 116 (1995) (product liability); U.S. Gypsum v. Baltimore, 336 Md. 145, 647 A.2d 405 (1994) (product liability).
While none of the above-cited cases specifically involved defamation, we have repeatedly stated that in all tort actions, an award of punitive damages must be based upon “ ‘conscious and deliberate wrongdoing, evil or wrongful motive, intent to injure, ill will, or fraud,’ ” Scott v. Jenkins, supra, 345 Md. at 33, 690 A.2d at 1006, quoting Montgomery Ward v. Wilson, supra, 339 Md. at 733, 664 A.2d at 932. “Maryland law has limited the availability of punitive damages to situations in which the defendant’s conduct is characterized by knowing
Consequently, under our recent decisions, punitive damages may only be awarded if the plaintiff proves, by clear and convincing evidence, that the defendant had the requisite mens rea, i.e., actual knowledge, to support such an award. Applying the principle of the recent opinions to defamation actions leads to the conclusion that punitive damages are allowable in such actions only when the plaintiff establishes that the defendant had actual knowledge that the defamatory statement was false.
The Court’s recent opinion which is most pertinent to the present case is Ellerin v. Fairfax Savings, supra, 337 Md. 216, 652 A.2d 1117, involving the appropriate standard for the allowance of punitive damages in actions of fraud or deceit. We began our analysis in Ellerin with an examination of the elements of a fraud or deceit action, in order to determine if the requisite malice was, indeed, an element of the tort. The opinion stated (337 Md. at 229, 652 A.2d at 1123, quoting Nails v. S & R, 334 Md. 398, 415-416, 639 A.2d 660, 668-669 (1994)):
*653 “ ‘In order to recover damages in an action for fraud or deceit, a plaintiff must prove (1) that the defendant made a false representation to the plaintiff, (2) that its falsity was either known to the defendant or that the representation was made with reckless indifference as to its truth, (3) that the misrepresentation was made for the purpose of defrauding the plaintiff, (4) that the plaintiff relied on the misrepresentation and had the right to rely on it, and (5) that the plaintiff suffered compensable injury resulting from the misrepresentation.’ ”
In St. Amant v. Thompson, 390 U.S. 727, 88 S.Ct. 1323, 20 L.Ed.2d 262 (1968), the Supreme Court held, inter alia, that certain statements made about a public official were not made with a “reckless disregard” for the truth. While the Court made clear that “reckless disregard” must be determined on a
Neither “entertainment of serious doubts” nor “awareness of ... probable falsity” approaches the mens rea of actual knowledge required in Ellerin. Arguably, such a standard falls short of the “reckless indifference” standard there rejected. It is clear, however, that “reckless disregard,” as defined above, certainly does not surpass the level of mens rea encompassed by “reckless indifference.” Thus, as a matter of Maryland common law, “reckless disregard” must be rejected as a standard for the award of punitive damages in defamation cases.
Because the jury was not properly instructed as to the basis for the allowability of punitive damages in defamation cases, we shall vacate the judgment for punitive damages and remand for a new trial on the punitive damages issue.
Le Marc’s also contends that there was insufficient evidence to support, by clear and convincing evidence, the knowing falsity standard. It also contends that the amount of the award was excessive and that certain evidence was erroneously permitted to be introduced. Since we have vacated the punitive damages award, it is not necessary to reach the excessiveness or evidentiary issues. At the new trial the parties are not limited to the evidence presented below, nor are they limited by previous evidentiary rulings. See Middle States v. Thomas, 340 Md. 699, 703-704, 668 A.2d 5, 7-8
JUDGMENT FOR PUNITIVE DAMAGES OF THE CIRCUIT COURT FOR MONTGOMERY COUNTY REVERSED, AND CASE REMANDED TO THAT COURT FOR A NEW TRIAL ON PUNITIVE DAMAGES. COSTS TO BE PAID BY THE PLAINTIFF-APPELLEE.
BELL, C.J., dissents.
. Hereafter we shall refer to both corporations collectively as “Le Marc’s.”
. The verdict sheet given to the jury stated as follows:
*650 "One: Do you find that the plaintiff has proven actual malice by clear and convincing evidence that defendants had actual knowledge of falsity or a reckless disregard for the truth? Either yes or no. If your answer is no, then you have completed your deliberations. If your answer is yes, proceed to question two.
Question Two: Do you award punitive damages to plaintiff? Either yes or no. If your answer is yes, enter below the sum which you award.
Question Three: Was the conduct of the defendants characterized by clear and convincing evidence of ill-will, spite or hatred? either yes or no.”
The jury answered the first two questions in the affirmative and the third question in the negative.
. In light of the Marchesi, Piskor, and Jacron opinions, it is clear that Question Three should not have been included on the verdict sheet in the case at bar.
. We note, as we have in several cases, that "actual knowledge ... does include the wilful refusal to know.” Owens-Illinois v. Zenobia, 325 Md. 420, 462 n. 23, 601 A.2d 633, 654 n. 23 (1992). For an explanation of this very limited concept, see State v. McCallum, 321 Md. 451, 458-461, 583 A.2d 250, 253-255 (1991) (Chasanow, J., concurring).
Dissenting Opinion
dissenting.
The majority opinion today continues the inexorable campaign that this Court began in 1992, in Owens-Illinois v. Zenobia, 325 Md. 420, 601 A.2d 633 (1992), to eliminate punitive damages and thereby insulate certain reprehensible, conduct from proper punishment. Its intent, the majority will protest, is not the elimination of punitive damages, but the assurance that such damages are awarded when they serve a real function; however, the elimination of punitive damages is the effect when the standard for the allowance of punitive damages is raised to a level that is virtually impossible to meet.
I once again write in protest of the allowance of reprehensible conduct being insulated from punishment by way of puni
The majority reasons from Ellerin’s analysis of the distinction between “reckless indifference” and “actual knowledge.” That analysis concluded that “reckless indifference,” although one of the elements of fraud or deceit and although sufficient to support an award for compensatory damages, was not in fact, the equivalent of “actual knowledge.” While acknowledging that acting with “reckless indifference” indicates that the defendant has “actual knowledge” of his or her lack of knowledge as to the veracity or falsity of the statement, the majority asserts that is not enough; what must be shown is that the defendant knew, in fact, that the statement was false. Applying that rationale to the requirement in defamation cases that the statement be made with “reckless disregard” of the truth, the majority reaches the identical result in this defamation case as it reached in Ellerin, a deceit case.
I dissented in Ellerin, taking issue with the change in the law and noting that the conduct reflected in proceeding with
“It has long been the law of Maryland and, thus, well settled, that a defendant, intending to mislead the plaintiff and fully aware that he or she does not know whether the representation he or she makes is true or false, commits the tort of fraud or deceit. E.g., Robertson v. Parks, 76 Md. 118, 131, 24 A. 411, 412 (1892). The rationale underlying the rule is that making a representation of a fact, with intent to deceive and actual knowledge that the speaker does not know whether it is fact or not, is as much a misrepresentation as one made with actual knowledge of falsity and that actual knowledge of the former is as repre - hensible as actual knowledge of the latter. Fully recognizing the state of the law, ... but noting that ‘Maryland cases concerning fraud or deceit have typically involved the form of the tort which is characterized by the defendant’s deliberate deception of the plaintiff by means of a representation which he knows to be false,’ the majority nevertheless ‘refines’ the actual knowledge prong of the tort, to include only that situation.... And it does so, fully cognizant that, as traditionally understood, the tort countenanced no amount of negligence, however gross.... There is absolutely no basis for the majority’s change of the law.”
337 Md. at 244, 652 A.2d at 1131 (citations omitted). Because of the majority’s reliance on Ellerin, those comments are just as applicable to this case.
An additional observation is in order. The damage to the defamed person is the same whether the defamer actually knows that what he or she is saying is false or simply knows that he or she does not know if the statement is true or false. What is more and most distressing to me is that after today, it simply will not be important to ensure that what is communicated about another person is true. As I interpret the majority opinion, as long as there is no evidence that the defamer actually knew the information was false and, I suppose, did not shut his or her eyes to what must have been obvious, it does not matter that a brief investigation would have made
I dissent, most respectfully.
. My views on, and concern about, raising the bar with respect to the proof of entitlement to punitive' damages were set forth at length in Owens-Illinois, Inc. v. Zenobia, 325 Md. 420, 478, 601 A.2d 633, 662 (1992)(Bell, J., concurring and dissenting). I continue to believe the
. The jury was instructed, after all:
"Malice exists, one, when a person malong the statement deliberately lies or makes the statement with knowledge that it is false or with reckless disregard as to the truth or falsity or, two, when the person making the statement had an obvious reason to distrust either the accuracy of the statement or the source from which the person learned of the statement or, finally item three, when the statement is invented by the person making it or is so inherently improbable that only a reckless person would say, write, or print it.”
Reference
- Full Case Name
- LE MARC’S MANAGEMENT CORPORATION Et Al. v. Francisco VALENTIN
- Cited By
- 27 cases
- Status
- Published