ALAN S. NOONAN, Plaintiff, Appellant, v. STAPLES, INC., Defendant, Appellee.
No. 07-2159
United States Court of Appeals For the First Circuit
February 13, 2009
Torruella, Wallace, and Lipez, Circuit Judges.
APPEAL FROM THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF MASSACHUSETTS
[Hon. Morris E. Lasker, U.S. District Judge]
Before Torruella, Wallace,* and Lipez, Circuit Judges.
Ariel D. Cudkowicz, with whom Krista Green Pratt and Seyfarth Shaw LLP, were on brief for appellee.
February 13, 2009
* Of the Ninth Circuit, sitting by designation.
TORRUELLA, Circuit Judge. Alan S. Noonan was fired from his job as a salesman at Staples, Inc. for allegedly padding expense reports. A Staples executive then sent a mass e-mail to about 1,500 employees informing them that Noonan had been fired for violating the company‘s travel and expense policy. Staples also denied Noonan his severance benefits and refused to allow him to exercise his stock options, claiming that, under the terms of the agreements setting forth the right to these benefits, Noonan was ineligible because he had been fired “for cause.” Noonan sued Staples in Massachusetts court for libel and breach of those agreements, and Staples removed to federal court. Both parties moved for summary judgment, the district court granted summary judgment in favor of Staples, and Noonan now appeals.
We initially affirmed the grant of summary judgment. Noonan v. Staples, Inc., 539 F.3d 1 (1st Cir. 2008). But, on panel rehearing, we withdraw
I. Background
Because this case comes to us on appeal from summary judgment, we relate the relevant facts in the light that most favors the nonmovant, Noonan. Franceschi v. U.S. Dep‘t of Veterans Affairs, 514 F.3d 81, 83 (1st Cir. 2008). Noonan was a Staples sales director who did much traveling for business and had to compile expense reports to be reimbursed for travel, food, and other business-related expenses. Staples had a travel and expense policy requiring employees to submit receipts for all expenses over $75, and for all meals regardless of price; to use their corporate credit card for business expenses instead of their personal credit card; and to book all work-related travel through Staples‘s travel department. Noonan claims, with support in the record, that these directives were irregularly enforced and often not followed by many employees.
In November 2005, Staples discovered that an employee named James Dorman had been embezzling money from the company through fraudulent expense claims and fired him. It then undertook an audit of expense reports based on a sample of sixty-five traveling employees in the North American Division, including Noonan. Auditors investigating Noonan discovered a May 2005 expense report in which he had requested $1,622 in excess of what he had actually spent. The team also found that Noonan had used his personal credit card for many of these purchases, had booked the travel through a non-company travel agent, and had failed to submit all the required receipts.
These anomalies led Staples to assemble a special team, composed of certified accountants and a former police investigator, to look further into Noonan‘s past expense reports. Noonan admitted to the team that he often “pre-populated” his reports before a given trip — that is, he estimated what his expenses would be in advance, and submitted the report with these estimates, but with (Noonan claims) the intention to amend the report later to the extent the actual expenses differed from the estimates. The team found that Noonan had failed to enter such adjustments on a number of expense reports and discovered other anomalies, such as entries where the amount claimed was exactly $100 more than what the item actually cost, and entries where decimal points had been shifted two places to the right (resulting, for example, in an $1,129 meal at an airport McDonald‘s, instead of $11.29). Noonan also committed errors in Staples‘s favor. When the team asked him about the large amounts of extra money that had been deposited into his checking account, Noonan responded that he had not noticed.
Based on its findings, the team unanimously concluded that Noonan had deliberately falsified the audited expense reports and, as a result, Staples fired him. It sent him a letter stating that he had been terminated “for cause” for violating the travel and expense policy and the company‘s Code of Ethics, and that he was consequently ineligible for severance benefits. The following day, Executive Vice-President Jay Baitler sent an e-mail to all the employees in Staples‘s North American Division, a group whose precise number is unknown and disputed, but that totaled somewhere around 1,500 people. The e-mail stated as follows:
It is with sincere regret that I must inform you of the termination of Alan Noonan‘s employment with Staples. A thorough investigation determined that Alan was not in compliance with our [travel and expenses] policies. As always,
our policies are consistently applied to everyone and compliance is mandatory on everyone‘s part. It is incumbent on all managers to understand Staples[‘s] policies and to consistently communicate, educate and monitor compliance every single day. Compliance with company policies is not subject to personal discretion and is not optional. In addition to ensuring compliance, the approver‘s responsibility to monitor and question is a critical factor in effective management of this and all policies. If you have any questions about Staples[‘s] policies or Code of Ethics, call the Ethics Hotline . . . or ask your human resources manager.
Over the course of Noonan‘s employment, he and Staples entered into two stock-option agreements, dating respectively from 1992 and 2004 (respectively, the “1992 Stock-Option Agreement” and the “2004 Stock-Option Agreement“). The pertinent language in the 1992 Stock-Option Agreement provided as follows:
[I]f [Noonan‘s] relationship with Staples is terminated by Staples for “cause” (as defined below) . . . the right to exercise this option with respect to any shares not previously exercised shall terminate immediately . . . .
“Cause” shall mean willful misconduct by [Noonan] or willful failure to perform his or her responsibilities in the best interests of Staples (including, without limitation, breach by [Noonan] of any provision of any employment, consulting, advisory, nondisclosure, non-competition or other similar agreement between [Noonan] and Staples), as determined by Staples, which determination shall be conclusive.
(Emphasis added.) The 2004 Stock-Option Agreement contained this language, and added other grounds constituting “cause,” including “violation by [Noonan] of the Code of Ethics or an attempt by [Noonan] to secure any improper personal profit in connection with the business of Staples.”
Six days before being fired, Noonan sent Staples a $290,714.40 check and notified it that he was exercising his vested right to purchase 23,825 shares of stock — 22,700 governed by the 1992 Stock-Option Agreement, and 1,125 governed by the 2004 Stock-Option Agreement. Staples returned the check uncashed, noting that the investigation into Noonan‘s expense-reporting practices was ongoing, and that if Staples ultimately terminated him for cause, he would not be entitled to gains on the shares. Staples did not ultimately allow Noonan to exercise the stock options.
Noonan also had a severance agreement with Staples which stated that Staples would not be required to pay benefits if Noonan was terminated “for ‘[c]ause‘” — that is, if Noonan “wilfully fail[ed] to substantially perform [his] duties with Staples,” “violate[d] the Code of Ethics or attempt[ed] to secure any improper personal profit,” or “engage[d] in misconduct which is demonstrably and materially injurious to Staples . . . .” On these grounds, Staples did not give Noonan severance benefits.
Noonan, a Florida resident, filed suit in Massachusetts state court; Staples, a Massachusetts corporation, removed to the U.S. District Court for the District of Massachusetts. Noonan‘s complaint alleged (1) libel based on the Baitler e-mail; (2) breach of the two stock-option agreements; and (3) breach of the severance agreement.1 Noonan moved for summary judgment
II. Discussion
A. Standard of Review
We will affirm a district court‘s summary judgment where “the pleadings, the discovery and disclosure materials on file, and any affidavits show that there is no genuine issue as to any material fact and that the movant is entitled to judgment as a matter of law.”
B. Libel Claim
Noonan claims first that Staples committed actionable libel against him through the sending of the Baitler e-mail. Under Massachusetts law, a plaintiff alleging libel must ordinarily establish five elements: (1) that the defendant published a written statement; (2) of and concerning the plaintiff; that was both (3) defamatory, and (4) false; and (5) either caused economic loss, or is actionable without proof of economic loss.2 Stanton v. Metro Corp., 438 F.3d 119, 124 (1st Cir. 2006) (citing White v. Blue Cross & Blue Shield of Mass., Inc., 809 N.E.2d 1034, 1036 (Mass. 2004)); Mass. Sch. of Law at Andover, Inc. v. Am. Bar Ass‘n, 142 F.3d 26, 42 (1st Cir. 2006) (quoting McAvoy v. Shufrin, 518 N.E.2d 513, 517 (Mass. 1988)).
Id. at 517. A statement is defamatory if it “may reasonably be read as discrediting [the plaintiff] in the minds of any considerable and respectable class of the community.” Disend v. Meadowbrook Sch., 604 N.E.2d 54, 55 (Mass. App. Ct. 1992) (citing Sharratt v. Housing Innovations, Inc., 310 N.E.2d 343, 346 (Mass. 1974)); accord White, 809 N.E.2d at 1036. Generally, under Massachusetts law, summary judgment for a libel defendant is appropriate if “the publication is not reasonably capable of any defamatory meaning, and cannot reasonably be understood in any defamatory sense.” Sharratt, 310 N.E.2d at 345 (quoting King v. Ne. Publ‘g Co., 2 N.E.2d 486, 487 (Mass. 1936)); see also Smith v. Suburban Rests. Inc., 373 N.E.2d 215, 217 (Mass. 1978) (“Inferences which might be drawn by a considerable and respectable segment of the community can make a publication actionable.“); Amtrak Prods., Inc. v. Morton, 410 F.3d 69, 72 (1st Cir. 2005) (in determining whether statement was defamatory, courts ask what a “reasonable reader” would think upon reading it) (quoting Foley v. Lowell Sun Publ‘g Co., 533 N.E.2d 196, 197 (Mass. 1989)).
Since a given statement, even if libelous, must also be false to give rise to a cause of action, the defendant may assert the statement‘s truth as an absolute defense to a libel claim. Mass. Sch. of Law at Andover, 142 F.3d at 42 (citing Bander v. Metro. Life Ins. Co., 47 N.E.2d 595, 598 (Mass. 1943)); McAvoy, 518 N.E.2d at 517. Massachusetts law, however, recognizes a narrow exception to this defense: the truth or falsity of the statement is immaterial, and the libel action may proceed, if the plaintiff can show that the defendant acted with “actual malice” in publishing the statement. White, 809 N.E.2d at 1036 n.4 (citing
Noonan argued before the district court, and reiterates before us, that Baitler‘s e-mail was both defamatory and false, and thus constituted actionable libel. Staples countered that the evidence clearly established that Noonan did indeed violate the company‘s travel and expense policy, and that the e-mail was consequently true and no libel action could lie. The district court sided with Staples, concluding that Noonan‘s libel claim could not proceed as a matter of law because the Baitler e-mail was true: even when viewed in the light most favorable to Noonan, the record demonstrates that he failed to comply with the policy. Our review of the record and Massachusetts law leads us to the same conclusion. Thus, there is no triable issue of fact on the question of truth.
We focus first on Noonan‘s arguments concerning the e-mail‘s falsity, because if the evidence corroborates Staples‘s asserted defense that the e-mail‘s contents were true, then absent actual malice on the part of Staples, the libel claim must be dismissed regardless of whether the e-mail defamed Noonan. See id. at 1036. Noonan does not seriously challenge that, on their face, all the sentences in the e-mail were true. As the e-mail states and the record bears out, Staples did indeed commission an investigation of Noonan‘s expense-reporting practices, and the investigators determined that he was not in compliance with the travel and expense policy. Even Noonan admits that he frequently disregarded the letter of the policy, booking travel with non-company travel agents, using his personal credit card instead of the company card, and failing to turn in receipts. Whether, as Noonan asserts, he actually saved Staples money — through, for example, buying cheaper plane tickets from online agents or committing mathematical or typographical errors on his expense reports in Staples‘s favor — is immaterial.3 Whether, as Noonan asserts, many other traveling employees also regularly disregarded the policy is likewise irrelevant. Even taking these assertions as accurate, they do not change the simple fact relayed in the e-mail, and supported by the evidence in the record, that Staples fired Noonan after an investigation determined him to be out of compliance with the travel and expense policy.
Noonan urges us, however, to look beyond the letter of the e-mail to the effect it
read other passages in the e-mail and, viewing the e-mail in its totality, drawn the inference that he arrogantly regarded Staples‘s policies as subject to his personal whim and committed some sort of grave misconduct — grave enough that Baitler himself departed from company policy on employee privacy by referring to Noonan by name in the e-mail. Indeed, according to Noonan, the e-mail‘s reference to an “investigation,” the recent experience with the firing and later indictment of Dorman for stealing money from the company, and the fact that Staples took the drastic step of terminating Noonan instead of merely reprimanding him or delaying the relevant reimbursements, could have led reasonable readers to conclude that he, like Dorman, committed a crime. At the very least, the e-mail‘s reference to the company Code of Ethics could have given reasonable readers the impression that Noonan was terminated for illegal or unethical conduct in the reporting of his travel expenses. As support for these arguments, Noonan cites a number of cases applying Massachusetts law and holding that, to determine whether a given statement is defamatory, the court must look at it as a whole and in the context in which it was published. See, e.g., Stanton, 438 F.3d at 125, 128; Foley, 533 N.E.2d at 197 (court must examine statement “‘in its totality in the context in which it was uttered or published[,] . . . consider[ing] all the words used, not merely a particular phrase or sentence‘” (quoting Myers v. Boston Magazine Co., 403 N.E.2d 376, 379 (Mass. 1980));
Smith, 373 N.E.2d at 218; Sharratt, 310 N.E.2d at 346 (“attendant circumstances may be shown as proof of the defamatory nature of the words“); Disend, 604 N.E.2d at 55 (“Words not inherently disparaging may . . . have that effect if viewed contextually, i.e., in the light of attendant circumstances.” (citing Sharratt, 310 N.E.2d at 346)).
Crucially, all of Noonan‘s cited cases concern how a court determines whether a given statement is, or could be understood as, defamatory,4 and not with the separate inquiry of whether the statement is true or false. As noted above, the impugned statement must be both defamatory and false for a libel action to lie, and these are distinct elements. Without saying so explicitly, Noonan is, in essence, asking us to import the corpus of legal principles for determining a statement‘s defamatory nature into the examination of the statement‘s truth or falsity. Noonan wants us to adopt a rule whereby even an objectively true statement can give rise to a libel claim if reasonable readers might infer from it other, untrue characteristics of the plaintiff or conduct by him.
Unfortunately for Noonan, our survey of the relevant Massachusetts law has uncovered no clear support for this interpretation, and we are reluctant to recognize such a significant expansion in view of our limited role as a federal court sitting under our diversity jurisdiction. See Gill v. Gulfstream Park Racing Ass‘n, Inc., 399 F.3d 391, 402 (1st Cir. 2005) (“A federal court sitting in diversity cannot be expected to create new doctrines expanding state
Given this holding, Noonan‘s only hope for keeping his libel claim alive is to prove that Staples — or other employees responsible for composing and sending the e-mail — acted with actual malice. As noted above, under Massachusetts law, even a true statement can form the basis of a libel action if the plaintiff proves that the defendant acted with “actual malice.”
The relevant statute,
A 1903 case from the Massachusetts Supreme Judicial Court explains that the term meant “malicious intention.” Conner v. Standard Publ‘g Co., 67 N.E. 596, 598 (Mass. 1903). Since 1964, however, the term “actual malice” has taken on a new meaning in defamation cases involving public figures; in this context, a person acts with “‘actual malice‘” when he acts “‘with knowledge that [a defamatory statement] was false or with reckless disregard of whether it was false or not.‘” Cantrell v. Forest City Publ‘g Co., 419 U.S. 245, 251 (1974) (alteration in original) (quoting New York Times v. Sullivan, 376 U.S. 254, 280 (1964)). But, the Supreme Court has explained that actual malice in the public-figure context is different than “common-law malice” or “ill will,” which is sometimes required under state law. Id. at 251-52.
Though the Massachusetts statute at issue in this case also uses the term “actual malice,” we are persuaded that we should
We now reject this conclusion for a number of reasons. First, since the statute was passed before the development of the modern definition of actual malice, it would not be consistent with legislative intent to read it as applying a more modern definition. See Sullivan v. Chief Justice for Admin. & Mgmt. of the Trial Court, 858 N.E.2d 699, 708 (Mass. 2006) (“The object of all statutory construction is to ascertain the true intent of the Legislature from the words used.” (quoting Champigny v. Commonwealth, 661 N.E.2d 931, 933 (1996))).9 Since the Legislature of 1902 could not have intended to apply the modern definition of “actual malice,” we will not apply it here, absent an explicit contrary interpretation from the Supreme Judicial Court. Rotkiewicz is not such precedent; it was a public-figure case and was not interpreting
Second, the legal context supports construing “actual malice” as “ill will” or “malevolent intent.” First, since the
statute deals not with public figures, but with defenses under traditional tort law, it is more appropriate to use the traditional tort law meaning of the term. Second, application of the modern meaning would produce the odd result that there would only be liability for true statements where the speaker acted with knowledge or recklessness as to the statement‘s falsity. The statute, however, was not likely meant only to apply to the rare case where a defendant utters a true statement which he seriously doubts or sincerely disbelieves. Finally, in the public-figure context, the “actual malice” test applies to statements of public concern, an area in which defamatory true statements are not actionable at all. See Phila. Newspapers v. Hepps, 475 U.S. 767, 768-69 (1986) (limiting recovery for true statements). Thus, applying this test in the case of true statements would be incongruous, as the modern “actual malice” test does not normally apply to true statements. See Seideman v. City of Newton, 895 N.E.2d 439, 444 (Mass. 2008) (“Courts must ascertain the intent of a statute from all its parts and from the subject matter to which it relates, and must interpret the statute so as to render the legislation effective, consonant with sound reason and common sense.“). For all these reasons, we conclude that
July 19,
The district court concluded that there was no evidence of actual malice. Viewing “actual malice” as “ill will,” we disagree. First, in Baitler‘s twelve years with the company, he had never previously referred to a fired employee by name in an e-mail or other mass communication. From this evidence, a jury could permissibly infer that Baitler singled out Noonan in order to
humiliate him. To be sure, Staples has offered a non-malicious explanation. Baitler stated in his deposition that he considered the e-mail naming Noonan to be important in effectively making the point to his employees that they must comply with Staples‘s travel and expense policies. But, a jury could nevertheless conclude that Baitler‘s explanation for the deviation from policy was pretextual. Cf. Brennan v. GTE Gov‘t Sys. Corp., 150 F.3d 21, 29 (1st Cir. 1998) (noting, in a discrimination case, that “[d]eviation from established policy or practice may be evidence of pretext“).11 Further, should the jury reject this explanation, such conclusion might lend further support to an inference of malicious intent. Cf. Reeves v. Sanderson Plumbing Prods., Inc., 530 U.S. 133, 147 (2000) (noting, in the discrimination context, that “[p]roof that the defendant‘s explanation is unworthy of credence is simply one form of circumstantial evidence that is probative of intentional discrimination, and it may be quite persuasive“). Considering the conflicting explanations evinced by the record, it is properly for the jury to decide whether to credit Baitler‘s explanation or instead to draw the competing inferences advanced by Noonan.
Second, Baitler had supervised Dorman and had failed to notice his misfeasance. Moreover, Baitler did not send around a similar e-mail regarding Dorman‘s actions. Noonan explains that he will argue to the jury that they should infer that Baitler singled out Noonan to detract attention away from the Dorman scandal. These facts, while speculative on their own, couldC. Breach of Stock-Option Agreements
Noonan next argues that the district court erred in granting summary judgmentD. Breach of Severance Agreement
Lastly, Noonan contends that the district court erred in granting summary judgment to Staples on his claim that it violated the severance agreement. We need not dwell long on this ground of appeal because it is foreclosed by the plain terms of the relevant instruments. The severance agreement provided that Noonan would not receive his severance benefits if Staples terminated him “for ‘[c]ause.‘” Another clause in the agreement provided that “cause,” for purposes of the severance agreement, includes a violation of Staples‘s Code of Ethics. The Code of Ethics, in turn, contained the following provision:Even viewed in the light most favorable to Noonan, the evidence in the record readily shows that he failed to abide by this clause of the Code of Ethics.17 As Staples suggests, even if all of Noonan‘s many expense-reporting discrepancies were simply careless mistakes or instances where he forgot to amend pre-populatedWe expect you to keep accurate records and reports . . . . All company books, records, and accounts must be maintained in accordance with all applicable regulations and standards and accurately reflect the transactions they record. . . . We do not permit . . . false or misleading entries in the company‘s books or records for any reason. . . .