1. Jackson Walker L.L.P. 1 Presented by: John K. Edwards Partner, Houston Office Jackson Walker L.L.P. DEFAMATION IN THE WORKPLACE and UPDATE ON EMPLOYEE BLOGGING (HBA – Labor & Employment Section)

2. Jackson Walker L.L.P. 2 A tort cause of action under state law generally defined as a communication, oral or in writing, that tends to injure a person’s reputation and thereby exposes the person to public hatred, contempt, ridicule, or financial injury. Defamation Defined

3. Jackson Walker L.L.P. 3 Defamation Defined (cont’d) Libel – Statutory Cause of Action (Tex. Civ. Prac. & Rem. Code § 73.001) “A libel is a defamation expressed in written or other graphic form that tends to blacken the memory of the dead or that tends to injure a living person’s reputation and thereby expose the person to public hatred, contempt or ridicule, or financial injury or to impeach any person’s honesty, integrity, virtue, or reputation or to publish the natural defects of anyone and thereby expose the person to public hatred, ridicule, or financial injury.”

4. Jackson Walker L.L.P. 4 Defamation Defined (cont’d) Slander – Common Law Cause of Action “Slander is a defamatory statement that is orally communicated or published to a third person without legal excuse.” (Randall’s Food Mkts., Inc. v. Johnson, 891 S.W.2d 640 (Tex. 1995))

5. Jackson Walker L.L.P. 5 Elements of Defamation Claim 1.Publication to a Third Person The statement(s) must be communicated to a person not the subject of the communication. 2.False Statement of Fact The communication must contain a false statement of fact, not opinion. 3.“Of and Concerning” Another The communication must relate to another identifiable person - no requirement of identification by name.

6. Jackson Walker L.L.P. 6 Elements of Defamation Claim (WFAA-TV, Inc. v. McLemore, 978 S.W.2d 568 (Tex. 1998)) 4.Defamatory Meaning The communication must expressly contain (or imply in limited instances) a defamatory meaning as defined by statute (libel) or common law (slander). 5.Fault The speaker must have acted with constitutional “actual malice” if a public official/figure or conditional privilege applies, or with negligence if a private figure or communication unprivileged. 6.Causation and Damages Reputational harm must be established, unless defamatory per se in which case damages are presumed.

7. Jackson Walker L.L.P. 7 Statute of Limitations (Tex. Civ. Prac. & Rem. Code §16.002(a)) The statute of limitations for defamation is one year after the cause of action accrues (i.e., the communication), and republication constitutes a new cause of action.

8. Jackson Walker L.L.P. 8 Common Defenses to Defamation Claim Truth At common law, falsity is a required element of the cause of action; however, under the Texas libel statute, truth is defined as a defense. Since the statute expressly states that it does not “affect the existence of common law,” falsity remains a required element of the cause of action and truth is an affirmative defense. Truth is evaluated under the “substantial truth” doctrine: “A statement is substantially true if the allegedly defamatory statement is not more damaging to the plaintiff’s reputation, in the mind of the average reader, than a truthful statement would have been.” (Masson v. New Yorker Magazine, Inc., 501 U.S. 496, 516-17 (1991); McIlvain v. Jacobs, 794 S.W.2d 14 (Tex. 1990))

9. Jackson Walker L.L.P. 9 Common Defenses to Defamation Claim (cont’d) Opinion While not technically a defense (defeats element of cause of action requiring a false statement of “fact”), courts often treat it as such. (Carr v. Brasher, 776 S.W.2d 567, 568 (Tex. 1989))

10. Jackson Walker L.L.P. 10 Common Defenses to Defamation Claim (cont’d) Consent “The consent of another to the publication of defamatory matters concerning him is a complete defense to his action for defamation.” (Restatement (Second) of Torts, § 583; Hooper v. Pitney Bowes, Inc., 895 S.W.2d 773, 778 (Tex. App.—Texarkana 1995, no writ))

11. Jackson Walker L.L.P. 11 Common Defenses to Defamation Claim (cont’d) Privilege Common law and statute provide several absolute and conditional/qualified privileges. The most common applicable to the employment context is the qualified privilege for statements made in good faith, without malice, on a subject in which the maker has an interest or duty, to another person having a corresponding interest or duty, and limited to its proper scope, occasion, and audience. (Dixon v. Southwestern Bell Tel. Co., 607 S.W.2d 240, 242 (Tex. 1980))

12. Jackson Walker L.L.P. 12 Corporate Liability for Defamation 1.Agency Liability A business entity is liable for the defamatory conduct of an officer or agent if that conduct is within the course and scope of their authority – that is, the defamation is referable to the duty owed by the officer or agent to the corporation, and the defamation was made in the discharge of that duty. (Frank B. Hall & Co., Inc. v. Buck, 678 S.W.2d 612, 627 (Tex. App.— Houston [14th Dist.] 1984, writ ref’d n.r.e.)) A principal is subject to respondeat superior liability for defamation “by a servant or other agent if the agent was authorized, or if, as to the person to whom he made the statement, he was apparently authorized to make it.” (Restatement (Second) of Agency, § 254)

13. Jackson Walker L.L.P. 13 Corporate Liability for Defamation (cont’d) 2. Direct Liability Ratification Ratification is the adoption or confirmation, by one with knowledge of all material facts, of a prior act that did not then legally bind that person and which that person had the right to repudiate. (Wal-Mart Stores, Inc. v. Odem, 929 S.W.2d 513, 530 (Tex. App.–San Antonio 1996, writ denied); Vessels v. Anschutz Corp., 823 S.W.2d 762, 764 (Tex. App.-Texarkana 1992, writ denied)) Adoption Liability for continued publication due to a failure to remove defamatory matter one knows to be exhibited on chattels (which would include a computer system) under his control. One in that position is required to “exercise reasonable care to abate the defamation, and he need not take steps that are unreasonable if the burden of the measures outweighs the harm to the plaintiff.” (Restatement (Second) of Torts, § 577(2) & cmt. p)

14. Jackson Walker L.L.P. 14 The Qualified Privilege The “common interest” qualified privilege is the most valuable defense available to an employer against an employee claim of defamation! Elements 1. An employer has a conditional or qualified privilege that attaches to communications made in the course of an investigation following a report of employee wrongdoing. 2. The privilege remains intact as long as communications pass only to persons having an interest or duty in the matter to which the communications relate. 3. Proof that a statement was motivated by actual malice existing at the time of publication defeats the privilege. (Randall's Food Mkts. v. Johnson, 891 S.W.2d 640, 646 (Tex. 1995))

15. Jackson Walker L.L.P. 15 1.Internal Investigations and Discipline Randall’s Food Mkts. v. Johnson, 891 S.W.2d 640 (Tex. 1995) Statements to effect that employee had left store without paying for a wreath did not imply theft and, in any event, statements were made by co-workers/supervisor during an internal investigation and were thus conditionally privileged. Rodriguez v. Wal-Mart Stores, Inc., 52 S.W.3d 814 (Tex. App.—San Antonio 2001, no pet.) Terminated employee’s defamation claim based on co-worker statements to District Attorney’s office that employee had written an NSF check against employer account were conditionally privileged, even if risk of misidentification existed, and no malice present. Minyard Food Stores, Inc. v. Goodman, 80 S.W.3d 573 (Tex. 2002) Texas Supreme Court reversed appellate court and upheld a jury verdict against a company for a defamatory statement, made during an investigation, because statement not shown to be in furtherance of business or investigation at issue, even if within “general authority” of the General Manager to make the statement. Recurring Employment Issues

16. Jackson Walker L.L.P. 16 Richard Rosen, Inc. v. Mendivil, 225 S.W.3d 181 (Tex. App.—El Paso 2005, pet. denied) Affirming jury verdict in favor of employee against former employer where, months after termination, an officer of the company informed the employee’s former supervisor that employee had been fired. Rerich v. Lowe’s Home Centers, Inc., 2007 WL 1412881 (Tex. App.—Houston [1st Dist.] 2007, no pet.) Rejecting defamation claim by employee against former employer based on communication that employee was terminated because of theft when the same or similar statements were made by the employee himself to co-workers. Exxon Mobil Corp. v. Hines, 2008 WL 509412 (Tex. App. [14th Dist.] 2008, pet.denied) Reversing jury verdict awarding over $400K to two terminated plaintiffs, and rendering judgment for former employer Exxon Mobil, where alleged violations of company policy concerning matching educational gifts were communicated company-wide, holding that reason for termination could be internally communicated and damages must be based on defamation, not termination. Recurring Employment Issues

17. Jackson Walker L.L.P. 17 LESSON: Statements concerning allegations of employee wrongdoing and/or reason for termination should be limited to a select few directly involved in investigation or termination, and results of investigations should be published only to those with a demonstrated “need to know.” Recurring Employment Issues

18. Jackson Walker L.L.P. 18 2.Applicant/Employee Testing Results Reeves v. Western Co. of N. Am., 867 S.W.2d 385 (Tex. App.—San Antonio 1993, writ denied) Rejecting slander claim based on oral statements made by supervisor of prospective employer informing both applicant, his wife, and allegedly others that applicant tested positive for alcohol in screen test because such statements were both true and conditionally privileged, with no evidence of malice. Doe v. SmithKline, 855 S.W.2d 248 (Tex. App.—Austin 1993), aff’d as modified on other grounds, 903 S.W.2d 347 (Tex. 1995) Rejecting libel/slander claims by an applicant who alleged that he was compelled to inform prospective employers that his application was withdrawn for failing a drug test, holding that applicant was aware of the defamatory nature of the statement as provided in a termination letter, thus failing to meet the compelled self-publication test. Recurring Employment Issues

19. Jackson Walker L.L.P. 19 LESSON: Applicant/employee should be given test results, and any further statements should be limited to only those with a need to know and be confined to the actual results, without further characterization. Washington v. Naylor Indus. Services, Inc., 893 S.W.2d 309 (Tex. App.—Houston [1st Dist.] 1995, no pet.) Rejecting employee claim of defamation against former employer based on internal communication of a positive drug test result when the result was preliminary and employee passed later, confirmatory result, holding that statement was literally true and conditionally privileged. Recurring Employment Issues

20. Jackson Walker L.L.P. 20 3.Performance Reviews / Personnel Files Ellert v. Lutz, 930 S.W.2d 152 (Tex. App.—Dallas 1996, no writ) Rejecting application of limitations discovery rule where secretary filed suit against former supervisor based on statements in a memo placed in personnel file, holding that since employee had access to personnel file all along, statements were not “inherently undiscoverable.” Leatherman v. Rangel, 986 S.W.2d 759 (Tex. App.—Texarkana 1999, pet. denied) Rejecting claim that since a copy of employee’s termination letter was maintained in her personnel file, it would likely be disclosed in future, thus constituting “publication,” holding that there is no “anticipatory defamation” where facts upon which relief sought have not yet occurred. Recurring Employment Issues

21. Jackson Walker L.L.P. 21 LESSON: Document statements concerning employee performance to support “truth” defense; Performance reviews should be communicated to employee and supervisor(s) only, and otherwise documented in personnel file, neither of which should be communicated beyond those with a need to know (generally, co-workers do not have a need to know). Schauer v. Memorial Care Systems, 856 S.W.2d 437 (Tex. App.--Houston [1st Dist.] 1993, no writ) Affirming summary judgment for employer in a defamation action based upon a mediocre performance review, where plaintiff admitted most of the statements were true, others were held to be protected opinion, and all were subject to the conditional privilege. Recurring Employment Issues

22. Jackson Walker L.L.P. 22 4.References Duncantell v. Universal Life Ins. Co., 445 S.W.2d 934 (Tex. Civ. App.—Houston [1st Dist.] 1969, writ ref’d n.r.e.) Holding that statement by former supervisor to prospective employer “not to fool with” former employee because he had taken money and could not be trusted related to plaintiff’s work record and was conditionally privileged, and no liability absent malice. Saucedo v. Rheem Mfg. Co., 974 S.W.2d 117, 120 (Tex. App.—San Antonio 1998, pet. denied) Applying conditional privilege to adverse statements by former employer to prospective employer when the job seeker requested that the employer contact the prior employer for references. Recurring Employment Issues

23. Jackson Walker L.L.P. 23 Oliphant v. Richards, 167 S.W.3d 513 (Tex. App.—Houston [14th Dist.] 2005, pet. denied). Rejecting claim by employee against former employer where, after experiencing difficulty locating a job, plaintiff hired an investigator to call former employee, who reported plaintiff had been fired for “substance abuse problems,” holding that by hiring an investigator, plaintiff invited the defamation and therefore claim barred. Moon v. Star-Telegram Operating, Ltd., 2007 WL 2460256 (Tex. App.—Fort Worth 2007, no pet.) Rejecting claim by employee that he was compelled to repeat reason for his termination – falsifying expense report – to prospective employers since he was aware that report, if untrue, was defamatory, and thus rejecting compelled self- publication theory where there is awareness of statement’s defamatory nature. Recurring Employment Issues

24. Jackson Walker L.L.P. 24 Recurring Employment Issues LESSON: Silence is golden, but if you provide references, obtain employee consent on front-end, do so in writing, and in case of adverse separation, stick to the objective and verifiable reason for termination without characterization (and inform employee of that reason at time of termination).

25. Jackson Walker L.L.P. 25 Employee Blogging 1.Definition “Blog” is short for web log, an internet-based personal journal or diary containing a writer’s unfiltered commentary, usually in reverse chronological order, on one or more subject matters, often with posting of reader comments and links to other related blogs or websites. 2.Scope There is a blog in existence on virtually every imaginable topic somewhere in the blogosphere. It is estimated that there are currently over 41 million blogs. Nearly 70% of companies have no policies or guidelines in place for employee bloggers.

26. Jackson Walker L.L.P. 26 Protection For Employee Blogging Public Employees Government employees enjoy First Amendment protection for their employment-related blogging activities. The Pickering-Connick test, devised from two U.S. Supreme Court cases, Pickering v. Board of Education (U.S. 1968) and Connick v. Myers (U.S. 1983), is often used to balance the free expression interest of the blogger against the government’s interest in maintaining an efficient workplace without disruption. Private Sector Employees Employees in the private sector are not protected by the First Amendment because there is no state action trigger. Such employees must rely on contract, common law, or statute for protection (e.g., Collective Bargaining Agreements, NLRA, Title VII, Sarbanes-Oxley and other whistleblower statutes).

27. Jackson Walker L.L.P. 27 Employee Blogging Claims Defamation Third-Party claim against employee/company Co-worker claim against employee/company Discrimination/Sexual Harassment Employee claim of discrimination against co-worker/company Employee complaint against company of discrimination Violation of Intellectual Property Rights Misappropriation of IP Copyright Violation Right of Publicity

28. Jackson Walker L.L.P. 28 Employee Blogging Claims (cont’d) Breach of Confidentiality/Invasion of Privacy Duty of Loyalty / Insider Trading Publication of Private Facts / Intrusion Confidential by Law (e.g., HIPPA) Violation of Collective Bargaining Rights Union Agreements NLRA

29. Jackson Walker L.L.P. 29 Notable Developments 1.Immunity under Federal Law? Section 230 of the Communications Decency Act of 1996. “No provider or user of an interactive computer service shall be treated as the publisher or speaker of any information provided by another information content provider.” Blakey v. Continental Airlines, Inc. 164 N.J. 38 (2000). If a company acts as host to an employee blogosphere, even absent direct sponsorship or approval of content, it may be subject to vicarious liability for comments made by an employee, including statements rising to the level of harassment or discrimination against another employee. LESSON: Since employer concerns over blogging generally center around content created by the employee and not taken from another “content provider,” employers should not expect immunity under Section 230.

30. Jackson Walker L.L.P. 30 Notable Developments 2.Unmasking the Anonymous Blogger In re Does 1-10, 242 S.W.3d 805 (Tex. App.–Texarkana 2007, no pet). First Texas case addressing the extent to which a company can discover the identity of an unknown blogger by compelling third-party discovery against an ISP. Hospital plaintiff sought to compel non-party ISP to disclose identity of blogger that posted defamatory statements about the hospital. Trial court ordered disclosure, but the Court of Appeals conditionally granted a writ of mandamus, instructing the trial court to determine whether the plaintiff could meet a summary judgment standard of proof for each element of the defamation claim. LESSON: Bloggers can remain anonymous in defamation actions if the plaintiff is unable to establish sufficient evidence to defeat a no-evidence summary judgment motion on the required elements of a defamation claim.

31. Jackson Walker L.L.P. 31 Notable Developments 3.Blogger Missteps & Other PR Nightmares Southern Pacific Funding Corporation Southern Pacific filed for bankruptcy in the late 1990s after its stock price fell from $17 to $1, a plunge triggered by blog postings that company executives were covering up multi-million dollar embezzlement and exaggerating economic forecasts. John P. Mackey & Whole Foods Market After the CEO of Whole Foods was outed as “rahodeb,” an anonymous poster on Yahoo’s Finance stock message board who defended the company and argued with detractors, the blog was terminated and an SEC investigation was opened to determine whether anything illegal had occurred. The SEC focused on posts concerning a competitor, Wild Oats Market, which Whole Foods ultimately acquired, and whether there was an attempt to manipulate its stock before the acquisition. The SEC recently decided not to pursue any action, and Mackey is back to blogging.

32. Jackson Walker L.L.P. 32 Notable Developments Burger King Burger King fired two employees in March, 2008 after it was discovered that an executive had anonymously posted blogs critical of a farmworker advocacy group with which the company was embroiled in a PR dispute over wages and working conditions for Florida’s tomato pickers. Delta Airlines Delta fired an employee for posting suggestive pictures of herself in a flight attendant uniform on her blog. Google Google fired an employee for being critical of the company on his blog.

33. Jackson Walker L.L.P. 33 Notable Developments Washington Post In April, 2008, a Washington Post editorial aide lost his job when he outed himself as “Christmas Ape,” a blogger on a sports satire website called “kissingsuzykolber.com”. His blog contained obscene, racist, and sexist commentary that violated company policy prohibiting conduct or activity that embarrassed the company. NASA A Johnson Space Center employee was suspended in May, 2008 for partisan blogging, which included soliciting donations and writing political blog posts that promoted local and state candidates in 2006 and 2007 while at work, in violation of the Hatch Act.

34. Jackson Walker L.L.P. 34 Notable Developments Albritton v. Cisco Systems, Inc. (E.D. Texas 2008) Cisco was recently sued for libel by two Texas patent attorneys based on an employee blog website called the “Patent Troll Tracker,” which focused on alleged “patent trolls” that purportedly buy patents simply to use them to file infringement suits. The blog was maintained anonymously, but the blogger unmasked himself in February, 2008 as Richard Frenkel, in-housel counsel at Cisco. According to the Plaintiff, Frenkel falsely accused him of colluding with a court clerk to alter the date on which a pleading was filed so as to manufacture subject matter jurisdiction. Cisco added a new clause to its blogging policy in March, 2008: “If you comment on any aspect of the company’s business or any policy issue the company is involved in where you have responsibility for Cisco’s engagement, you must clearly identify yourself as a Cisco employee in your postings or blog site(s) and include a disclaimer that the views are your own and not those of Cisco. In addition, Cisco employees should not circulate postings that they know are written by other employees without informing the recipient that the source was within Cisco.”

35. Jackson Walker L.L.P. 35 General Policy Guidelines No blogging while at work (and no use of company property). If corporate policy permits blogging, the company’s computer monitoring policies will apply (no anonymous blogging). No unauthorized use of company trade names, logos, slogans, and no unauthorized disclosure of trade secrets, trademarks, copyrights, or any other confidential, proprietary and non-public information. No inappropriate content about the company or its employees that would be considered disparaging, threatening, harassing, or otherwise discriminatory.

36. Jackson Walker L.L.P. 36 General Policy Guidelines (cont’d) Employees are solely responsible for blog content, including any alleged violation of policy or law. Violation of the blogging policy may subject the employee to disciplinary action, including termination. Widely disseminate the policy with signed employee acknowledgment of receipt. The blog must include a prominent disclaimer that the views expressed are those solely of the author and not the company.