Lead Opinion
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
Sauer then met with Valentin and explained that there was not a copy of his resignation letter in his file and asked him if he had a copy. Sauer also testified that Valentin was questioned about whether or not, during his tenure with Le Marc’s, he had actual knowledge that other employees were stealing. Sauer was concerned about Valentin’s knowledge of employee thefts because in Valentin’s personnel file were notes that Valentin had, indeed, told Cefai that he suspected some of his fellow employees were stealing merchandise. Sauer then left the room, drafted a document, and when he returned he presented it to Valentin asked him to sign it. The document included language indicating that, while Valentin never personally stole merchandise, he later discovered other employees were stealing and that he “did not want to say anything to my manager about [this] ... situation[ ].” Valentin signed the document, believing that Sauer would then call and write a letter to the Bank clearing his name.
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.
On August 17, 1990, Valentín filed this defamation action in the Circuit Court for Montgomery County against Le Marc’s Management Corp. and Le Marc’s Fifth Avenue Cards, Inc. The case was tried before a jury in May 1993. The jury found that Valentin was defamed and awarded him $25,000 in compensatory damages and $130,000 in punitive damages. Le Marc’s filed motions for judgment notwithstanding a verdict, a new trial, and remittitur. Valentin filed a motion for a new trial. The trial court denied all the motions except the remittitur, and entered judgment in Valentine’s favor for $25,000 compensatory damages and $75,000 punitive damages. Both parties appealed, and in an unreported opinion the Court of Special Appeals affirmed the compensatory damages, but vacated the punitive damages award. The basis of the reversal was the failure of the trial court properly to instruct the jury that the standard of proof for any punitive damages award is clear and convincing evidence. Both parties filed petitions for a writ of certiorari, which we denied.
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 inherentlyimprobable 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,
In New York Times Co. v. Sullivan,
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,
Subsequently, in Owens-Illinois v. Zenobia, supra,
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,
“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,
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,
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,
“ ‘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 theplaintiff relied on the misrepresentation and had the right to rely on it, and (5) that the plaintiff suffered compensable injury resulting from the misrepresentation.’ ”
It is clear that the holding in Ellerin supports actual knowledge of the falsity as the sole standard for the award of punitive damages in defamation cases as well. Like fraud or deceit actions, the tort of defamation requires the plaintiff to prove that the defendant’s statement was false. But the alternate standard heretofore applied for punitive damages in defamation cases, namely “reckless disregard” for the truth, is no greater than the level of scienter required by the “reckless indifference” standard rejected in Ellerin.
In St. Amant v. Thompson,
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
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.
Notes
. Hereafter we shall refer to both corporations collectively as “Le Marc’s.”
. The verdict sheet given to the jury stated as follows:
"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,
Dissenting Opinion
dissenting.
The majority opinion today continues the inexorable campaign that this Court began in 1992, in Owens-Illinois v. Zenobia,
I once again write in protest of the allowance of reprehensible conduct being insulated
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 “reckless indifference” was no less reprehensible than the conduct engaged in with actual knowledge:
“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.”
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
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,
. 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.”
