Takeaway: This case underscores the need to keep any suspicions of employee misconduct confidential. Such suspicions, no matter how well-founded, should be communicated only in good faith on a limited basis to interested parties, such as employers and law enforcement. Employee defamation claims can exact a high price from employers where suspected misconduct is shared too broadly.
Claims for defamation, malicious prosecution and infliction of emotional distress filed by a delivery driver after he was reported to his employer and local law enforcement on suspicion of stealing product from shipments were properly dismissed at the summary judgment stage, a federal appeals court recently decided.
The plaintiff worked as a contract driver in Louisiana for a transportation company handling deliveries for another company that serviced retail locations of two national beauty retailers.
In 2017, the service company noticed significant shrinkage at locations serviced by the driver. The company’s logistics asset protection manager received notices of specific items missing from four deliveries made to a specific store. At the same time, its regional asset protection manager reported seeing that company’s branded products for sale on various social media platforms. The products appeared to be in the original distribution center packaging, indicating that they might have been stolen during the warehousing or delivery process.
The service company had a comprehensive tracking and scanning system in place, using unique labels with a bar code and identification number that were affixed to each shipped carton. Every delivery driver was required to hand over their bar code scanner to a store employee before unloading a shipment. Cartons were to be scanned and marked as delivered in the system as the drivers brought them into the store. For delivery drivers, possessing the scanner while unloading the truck was grounds for automatic termination. Drivers were required to report any delivery discrepancies each day.
The two managers conducted a driver observation of the plaintiff. At his final stop, they approached him and explained they were conducting an audit of his truck. Before searching the truck, they asked the driver if there had been any issues with the delivery that day, and he responded no. A search of the truck revealed six cartons, which appeared to have been tampered with, off to one side. Product from small cartons appeared to have been consolidated into larger cartons, which contained products from both stores.
The managers concluded that the driver had been attempting to steal product, and they reported their findings to both the transportation company that employed him and local law enforcement, per company policy. When the managers returned the missing product to the intended stores, store employees confirmed that the driver had taken the scanner out to the truck.
The managers then asked the transportation company to remove the driver from their company’s account. His contract employer terminated its relationship with the driver.
The local police department obtained an arrest warrant for the driver. Although he was later arrested, no charges were filed against him.
Legal Action
The driver sued the service company and its two managers, alleging defamation, malicious prosecution and negligent infliction of emotional distress. The district court granted summary judgment in favor of the defendants and dismissed the case.
Delving into the defamation claim on review, the 5th U.S. Circuit Court of Appeals explained that to prevail in Louisiana, a plaintiff must prove the defendant, with actual malice or other fault, published a false statement with defamatory words that caused the plaintiff harm. Although the defendants argued that they were merely reporting the results of their investigation, the court found that—considering their statements together and taken in the context of their request for the driver to be removed from their account—they were accusing the driver of criminal conduct.
“Regardless of whether the statements were defamatory, defendants contend that these statements are protected by the conditional privilege,” the court said. The elements of the conditional privilege, which shifts the burden from the defendant to rebut the plaintiff’s allegation of fault to the plaintiff to establish an abuse of the privilege, generally are “good faith, an interest to be upheld and a statement limited in scope to this purpose, a proper occasion, and publication in the proper manner and to proper parties only,” the court said.
There is no meaningful dispute that the statements were made to the proper parties, the court said, noting that Louisiana courts have consistently recognized that good-faith reports to law enforcement as to suspected criminal activity are covered by the conditional privilege. Further, courts have extended the conditional privilege to good-faith reports of suspected wrongdoing made when the parties share a common business or financial interest.
Although the driver claimed that the managers made defamatory statements to improper third parties, including other drivers and his family, nothing in the record supports these allegations, the court said. Not only did the record fail to show that the managers either knew their statement that the driver had stolen merchandise was false or acted in reckless disregard as to its falsity, “but it also contains ample evidence supporting [their] assertions that they were justified in believing their statements to be accurate.”
The court stated that the underlying facts—including that the context of the investigation suggested potential misconduct on the part of the delivery driver, the presence of six cartons that had been scanned as having been delivered earlier in the day in the back of the truck at the driver’s last stop, the scan history, the state of the six consolidated cartons, and the inability of the driver’s supervisor to offer a plausible explanation for the presence of the six cartons—support a good-faith suspicion that the driver was involved in the theft of the merchandise. Finding that the statements were limited communications made in good faith and only to interested parties, the court held that the conditional privilege applied, and therefore the plaintiff could not prevail on his defamation claim.
Turning to the plaintiff’s malicious prosecution claim, the court held that it failed for the same reason: his failure to show the existence of malice.
Finally, the court addressed the negligent infliction of emotional distress claim, noting that Louisiana does not recognize this as an independent tort. The claim is derivative of the plaintiff’s defamation and malicious prosecution claims, the court said, affirming the district court’s grant of summary judgment as to all claims.
Phillips v. L. Brands Service Co. LLC, 5th Cir., No. 22-30245 (Sept. 8, 2023).
Rosemarie Lally, J.D., is a freelance legal writer based in Washington, D.C.
