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Media Alerts - Sherman v. Rinchem Company - 8th Circuit
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December 6, 2012
  Sherman v. Rinchem Company - 8th Circuit
Headline: Eighth Circuit panel rejects defamation claim and rules that federal law, not state law, controls the imposition of an adverse inference instruction in federal court for alleged spoliation of evidence

Area of Law: Defamation, Evidence

Issue(s) Presented: Whether the district court properly granted summary judgment to the Defendant on Plaintiff's defamation claim, and whether the district court properly refused to grant Plaintiff's summary judgment motion as a proposed sanction for Defendant's alleged spoliation of evidence

Brief Summary: Plaintiff Sherman worked for defendant Rinchem Company. One or more Rinchem employees complained to the Company about Sherman's conduct in the workplace. In response to the complaints, the Company conducted an investigation. During that investigation, the Company asked Sherman whether he "had ever received any restraining orders." Sherman allegedly said that the only persons who had ever obtained a restraining order against him were his ex-wife and her husband. But the Company believed it had evidence that this was not an accurate response. The Company terminated Sherman, ultimately citing a "change of corporate direction." But Sherman in his lawsuit claimed that he was effectively compelled to tell prospective new employers that "Rinchem terminated him for lying."

During the lawsuit, Sherman asked Rinchem to produce the notes taken by a Rinchem investigator during a key interview. Rinchem did not produce the notes, and the investigator eventually testified that she "lost" them. Sherman's counsel conceded that the record suggested the spoliation was negligent rather than intentional.

As to the defamation issue, the district court ruled that Rinchem was entitled to qualified immunity in the context of the employment investigation. As to the spoliation of evidence issue, the district court ruled that federal law controls whether and when sanctions should be awarded in the context of a federal court lawsuit, and concluded that neither summary judgment nor an adverse inference instruction in favor of Sherman could be awarded under federal law in the absence of bad faith conduct.

A panel of the Eighth Circuit affirmed. Considering the spoliation issue first, the panel ruled that Minnesota state law would be more liberal than federal law in awarding sanctions for spoliation of evidence in the absence of bad faith conduct. But the panel then ruled that federal law governs spoliation issues even in a diversity of citizenship case involving substantive claims under state law. The panel concluded that "a spoliation ruling is evidentiary in nature and federal courts generally apply their own evidentiary rules in both federal question and diversity matters."

Turning to the defamation issue, the panel ruled under Minnesota substantive law that, "[o]ne who makes a defamatory statement will not be held liable if the statement is published under circumstances that make it qualifiedly privileged and if the privilege is not abused." The panel concluded that the relevant statement must have been "made upon a proper occasion," "made from a proper purpose," and "based upon reasonable and probable grounds." If it was, then the burden shifts to the plaintiff to show the statement was made with actual malice on the part of the defendant.

In the present case, the panel concluded, Rinchem had a proper occasion and purpose for communicating to Sherman the basis for his termination. Rinchem did an investigation and had "probable cause" for believing that Sherman had lied to the interviewer. Sherman did not prove that Rinchem thought it was making any false statement about Sherman, and Sherman produced no evidence that the relevant interviewer bore any ill will towards Sherman. Even if the Rinchem interviewer had a suspicious alternate reason for recommending Sherman's termination, the presence of probable cause for Rinchem's action precluded malice from going to the jury, thought the panel. Thus, summary judgment for Rinchem was appropriate.

The full text of the opinion may be found at http://www.ca8.uscourts.gov/opndir/12/08/112932P.pdf

Argument (if known): 5/16/2012

Date of Issued Opinion: 8/6/2012

Docket Number: 11-2932

Decided: Affirmed

Counsel (if known): Philip G. Villaume, for Appellant Sherman; Vincent John Ella, for Appellee Rinchem

Author of Opinion: Judge Smith

Edited: 12/12/2012 at 10:27 AM by Media Alerts Moderator

    Posted By: Brian Graupner @ 12/06/2012 04:10 PM     8th Circuit  

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