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Jones v. Western & Southern Life Insurance Co.

August 5, 1996




Appeal from the United States District Court for the Southern District of Illinois. No. 92 C 395 William L. Beatty, Judge.

Before HARLINGTON WOOD, JR., KANNE, and DIANE P. WOOD, Circuit Judges.

DIANE P. WOOD, Circuit Judge.



Dwaine Jones worked as an income maintenance specialist at the Centralia office of the Illinois Department of Public Aid (IDPA). He was also licensed by the State of Illinois to sell insurance. Although he was not actively engaged in that business, he kept his license current primarily for the purpose of servicing existing clients. One group of clients, however, was off limits: the public aid recipients who visited Jones in his capacity as an IDPA employee. Among the IDPA's rules governing conduct of employees was Rule No. 8, which prohibits employees from engaging in business with public aid recipients without permission.

This case arose when Gloria James, an acquaintance of Jones (who was dating his brother), purchased a life insurance policy from the Western & Southern Life Insurance Company (Western). James overheard Jones discussing insurance at a restaurant one day, and she asked him what he thought of her policy from Western. Jones told her that he could give her a better deal and promptly did so. He sold her a U.S. Life Insurance Co. policy, and she then canceled the Western policy. At the time of the sale, Jones apparently did not know that James was a public aid recipient.

When Western learned that James had canceled her policy with them, it arranged to have two of its agents, Lindell Furlow and Mark Carney, meet with both Jones and James at the latter's home. During this meeting, Furlow learned that Jones was a full-time employee of the IDPA. He also began to suspect that James was a public aid recipient, noting both the general surroundings and that she lived in a public housing project with her three children. Without looking any further into the question of James' public aid status, Furlow reported his suspicions to his boss, Ron Germann. Germann in turn called the Centralia office of the IDPA and asked if Jones worked there; the person answering the telephone neither confirmed nor denied Jones' employment status. Germann then telephoned the IDPA Chief of Internal Affairs, Jerry Donovan. Donovan asked Germann to write him a letter regarding Jones and the insurance question, which Germann did. The letter stated that "[w]e suspect that Mr. Jones is selling insurance to public aid recipients while working for the Department," and it named James as a person whose policy had been replaced by Jones. Germann also sent a copy of the letter to the Illinois Department of Insurance (DOI).

After the IDPA and DOI received Germann's letter, the state initiated a criminal investigation of Jones -- a fact which Jones' supervisor announced to some 20 to 24 people at a staff meeting. Jones was subsequently shunned at work and suffered from fatigue and anxiety. He also alleged that, but for the difficulties in Illinois, he would have been able to take a job managing the business concerns of Dr. James C. Moore in Warner-Robbins, Georgia, at a salary of $125,000 per year. With the exception of the alleged lost job opportunity, matters in the end were apparently resolved rather favorably to Jones. Though Donovan concluded that Jones violated IDPA Rule 8 by selling James the U.S. Life Insurance policy, Jones was not demoted or disciplined, received the normal raises he would have expected, and, so far as the record shows, continues to work at IDPA.

Jones brought this action on May 18, 1992, in the Southern District of Illinois, relying on diversity jurisdiction. Counts I and II of his complaint alleged that on May 22, 1991, Western defamed him by orally communicating to IDPA that Jones was using an IDPA database to obtain the names of potential insurance customers and that he was intimidating IDPA clients into purchasing insurance. Counts III and IV alleged that on May 23, 1991, Western's agent Germann sent a defamatory letter to IDPA and to the DOI, which stated that while employed by IDPA, Jones sold insurance to welfare recipients (plural). The letter also allegedly implied that Jones was unfit to serve as an IDPA caseworker or insurance agent in Illinois, and that he had committed the criminal offense of Official Misconduct (a Class 3 felony). 720 ILCS 5/33-1 et seq.

After a trial on the merits, Counts III and IV (the letter counts) were submitted to the jury. The jury awarded Jones $5,000 in compensatory damages and no punitive damages. After the district court denied his motion for new trial on the grounds of insufficiency of the jury verdict, Jones appealed. Before this Court, he asserts both that the jury was improperly instructed on the defense of qualified privilege and the status of lost wages as an element of damages and that the judge should have admitted Western's annual financial statements into evidence. Jones also argues that the district court should have granted judgment as a matter of law in his favor or ordered a new trial.

Initially, it is worth noting who is appealing and why. Jones, after all, prevailed at the trial, and his arguments on appeal boil down to the proposition that he should have won more money than he did. Western, for its part, did not file a cross appeal, presumably because it was happy to have the case over with for the relatively modest sum of $5,000. Thus, it is the "loser" who is defending most of the proceedings below before us, and the "winner" who is complaining. With that in mind, we consider first Jones' arguments about the jury instructions, and then we turn to his evidentiary arguments.

Illinois law governs Jones' action for libel. The key issue here was whether Germann's letter to the IDPA and the DOI was protected by a qualified privilege, and if so, whether the privilege was abused. The governing Illinois decision on this issue is Kuwick v. Starmark Star Marketing and Administration, Inc. 619 N.E.2d 129 (Ill. 1993). In Kuwick, the Illinois Supreme Court explained that the qualified privilege in defamation law is based on "the policy of protecting honest communications of misinformation" in order to facilitate the availability of correct information. Id. at 133. Where no privilege exists, "the plaintiff need only show that the defendant acted with negligence in making the defamatory statements to prevail." Id. However, "once a defendant establishes a qualified privilege, a plaintiff must prove that the defendant either intentionally published the material while knowing the matter was false, or displayed a reckless disregard as to the matter's falseness." Id.

The Kuwick Court adopted the approach of the Restatement (Second) of Torts, secs. 593-599 (1977), as to the allocation of responsibility between the judge and the jury in this process. The court looks only to the occasion itself for the communication and decides as a matter of law and general policy whether the occasion created some recognized duty or interest to make the communication privileged. The Kuwick Court identified three general situations in which conditionally privileged occasions arise: (1) some interest of the person who publishes the defamatory matter is involved, (2) some interest of the person to whom the matter is published or of some other third person is involved, and (3) a recognized interest of the public is concerned. Id. at 135. If the party asserting the privilege satisfies its burden, the factual questions relating to abuse, such as the defendant's good faith, the scope of the statement, and the defendant's choice of recipient, are left for the jury to determine. Id. at 134.

During the trial it became clear that Western had brought forward enough evidence to raise the issue of qualified privilege. Using the Kuwick analysis, the district court decided that one of the "occasions" for the privilege was present, and the question whether Western had abused the privilege was submitted to the jury. The fact that the jury awarded Jones $5,000 can mean only one thing: the jury agreed with Jones, not Western, that the privilege was abused. Given this outcome, any error in the instructions regarding the ...

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