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Richard D. Powell v. Services

April 1, 2011


The opinion of the court was delivered by: Elaine E. Bucklo United States District Judge


Plaintiff Richard Powell ("Powell") sued XO Services, Inc.*fn1 ("XO" or "the Company") and three of its employees -- Scott Gentles ("Gentles"), David Nash ("Nash"), and Trent Edwards ("Edwards") in the Circuit Court of Cook County, Illinois, asserting claims for defamation and breach of contract. Defendants removed the suit to this Court, and now seek to dismiss the complaint pursuant to Fed. R. Civ. P. 12(b)(6) for failure to state a claim and Fed. R. Civ. P. 12(b)(2) for lack of personal jurisdiction. For the reasons discussed below, the Rule 12(b)(6) motion is granted as to Nash and Edwards but denied as to Gentles and XO. Gentles's Rule 12(b)(2) motion is denied. Nash's and Edwards's Rule 12(b)(2) motion is denied as moot.

I. XO is a provider of telecommunications services for businesses.

In July 2007, the Company's network facility in Chicago experienced a power outage, resulting in a loss of services to many of its customers. The outage was caused by a shortage of "rectifiers" needed to convert AC power into DC power. As a result, XO's Central Office Engineering ("COE") in New Jersey, sent a Candeo Portable DC Power Plant ("the Plant") to the Chicago location. Powell insists that XO did not send all of the necessary equipment. By the time the Plant arrived, however, it was no longer needed. The Plant was never used and instead was stored in an XO facility in Oak Brook, Illinois.

In 2009, XO's Chicago location was undergoing an expansion, and employee Tom Schreck ("Schreck") was sent by XO to Chicago to assess the needed power upgrade. According to the complaint, Powell asked Schreck during the visit to inspect the Plant that had been sent during the 2007 outage. Schreck allegedly told Powell that the equipment was damaged and obsolete and that he should sell it for scrap. Acting on Schreck's directions, Powell had the equipment picked up and disposed of by a scrap dealer. Neither Powell, nor anyone else, received money in exchange for the Plant's disposal.

Schreck later told Gentles about the Plant that Powell had shown him. Schreck also told Gentles that he had instructed Powell to dispose of the equipment as scrap. Despite having this information, Gentles initiated an ethics investigation into the disposal of the Plant, persuading others that Powell had sold the equipment and pocketed the money. According to Powell, Gentles had developed a personal animosity towards him because he had been critical of Gentles's performance in previous years.

On January 4, 2011, XO employees David Nash ("Nash") and Trent Edwards ("Edwards") traveled to XO's Chicago office and conducted an investigation into the matter. On January 5, 2010, they prepared a written report summarizing their interviews with witnesses and stating their findings and recommendations. The report concluded that Powell had disposed of the missing equipment at Schreck's direction. It recommended that Schreck be terminated and that Powell and one of his subordinates, Don Robinson, be given written warnings.

Nash and Edwards sent a copy of the report to Gentles, who wrote additional comments of his own on the document. Gentles's comments were more critical of Powell than were those in the report. Gentles wrote that Powell should be terminated and that Schreck and Robinson should be reprimanded and placed on probation. Powell alleges that the report with Gentles's handwritten comments was circulated among XO's upper management.

On January 6, 2010, Edwards and Nash met with Powell and issued him a written reprimand. The reprimand stated that Powell had failed to uphold his responsibility "to question and confirm the validity of [Schreck's] request" to dispose of the Plant. Compl. ¶ 55. It also stated that Powell had created a "management environment [in which] subordinates [did] not feel empowered to challenge or disagree with [his] direction." Id. Edwards shook Powell's hand, telling him that the incident was over and that he looked forward to having a good working relationship with him in the future. The next day, however, Edwards told Powell that, after further discussions with XO's management, his employment was terminated.

II. A. Defamation

Count I of Powell's complaint asserts a claim for defamation per se based on the statements about him in the report. The defendants move to dismiss the claim pursuant to Fed. R. Civ. P. 12(b)(6), contending that the statements in the report are not actionable.

In order to prevail on a defamation claim, "plaintiff is required to prove that defendant made a false statement concerning plaintiff, that there was an unprivileged publication of the defamatory statement to a third party by defendant and that plaintiff was damaged." Wynne v. Loyola Univ. of Chicago, 741 N.E.2d 669, 675 (Ill. App. Ct. 2000). "Statements can be either defamatory per quod, i.e., requiring extrinsic facts to explain the defamatory character of the statements, or defamatory per se." Id. "Four categories of statements are considered defamatory per se: (1) words that impute the commission of a criminal offense; (2) words that impute infection with a loathsome communicable disease; (3) words that impute an inability to perform or want of integrity in the discharge of duties of office of employment; and (4) words that prejudice a party, or impute a lack of ability, in his or her trade, profession, or business." Id.

In Illinois, defamation suits are subject to the "innocent construction rule." "Under this rule, a written or oral statement is to be considered in context, with the words and the implications therefrom given their natural and obvious meaning; if, as so construed, the statement may reasonably be innocently interpreted or reasonably be interpreted as referring to someone other than the plaintiff it cannot be actionable per se." Patlovich v. Rudd, 949 F. Supp. 585, 590 (N.D. Ill. 1996) (quotation marks omitted). Furthermore, "[a]n offshoot of the innocent construction rule is that the court should, if the context permits, limit statements about the plaintiff to a particular setting or single instance, so that the statements do not generally impugn the plaintiff's fitness for his or her chosen occupation." Skolnick v. Correctional Medical Services, Inc., 132 F. Supp. 2d 1116, 1124 (N.D. Ill. 2001).

Powell's complaint identifies thirteen allegedly defamatory statements. See Compl. ¶ 72. Of these, six are attributed to Nash and Edwards:

(1) Edwards and Nash state: "During a routine audit of equipment by the Engineering Group (COE), it was determined that a $40,000 DC Power Plant had been taken to Chicago during ...

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