Amoroso, Vince v. Schuh, Dale et al
Filing
43
ORDER denying 24 Motion to Dismiss. Signed by District Judge William M. Conley on 09/30/2017. (mfh)
IN THE UNITED STATES DISTRICT COURT
FOR THE WESTERN DISTRICT OF WISCONSIN
VINCE AMOROSO,
Plaintiff,
OPINION AND ORDER
v.
15-cv-119-wmc
DALE R. SCHUH, KENNETH ERLER, PETER
McPARTLAND and JAMES PEARSON,
Defendants.
In this lawsuit, plaintiff Vince Amoroso asserts defamation claims against four
former colleagues at Sentry Insurance, a Mutual Insurance Company, arising out of a
memorandum circulated among Sentry’s Board of Directors (“the Board”).
The
memorandum purported to apprise the Board of potential issues arising under the
attorney-client privilege using three different “scenarios,” each involving an unnamed
“Director X.” Defendants have moved to dismiss on three grounds: (1) the statements
forming the basis for plaintiff’s defamation claims are incapable of having defamatory
meaning; (2) the statements at issue are subject to the common interest privilege; and (3)
plaintiff’s alleged injury is not cognizable under defamation law. (Dkt. #24.) Although a
close question in light of the context and arguably innocuous indirect nature of the
defamatory statements, the court will nevertheless deny defendants’ motion for the
reasons set forth below.
1
ALLEGATIONS OF FACT
A.
The Parties
Plaintiff Vince Amoroso is a citizen of Florida, where he resides. From 2003 until
2014, Amoroso served as a member on the Board of Directors of Sentry Insurance, which
has its principal place of business in Stevens Point, Wisconsin.
Defendants Dale R. Schuh, Kenneth Erler and Peter McPartland all reside in and
are citizens of Wisconsin, as well as officers of Sentry Insurance during the times relevant
to this lawsuit. Schuh was the Chief Executive Officer of Sentry and Chairman of its
Board; Erler was Sentry’s Senior Vice President, Chief Administrative Officer and
General Counsel; McPartland was Sentry’s President, later succeeding Schuh as Chief
Executive Officer and Chairman of the Board. Finally, defendant James Pearson is a
citizen of Illinois and was Chairperson of Sentry’s Governance Committee during the
times relevant to this lawsuit.1
B.
Board Membership
Amoroso was a member on Sentry’s Board from 2003 until 2014, for which he
received about $200,000 per year in compensation. Between 2003 and 2012, Amoroso
was elected to consecutive three-year terms, consistent with Sentry’s Governance
Committee customary practice of recommending to re-elect a Board member whose term
is expiring at a regularly scheduled Board meeting in November. At a meeting in the
following February, the Board would then “perfunctorily adopt[] the recommendation of
This court has diversity jurisdiction under 28 U.S.C. § 1332, since plaintiff is not from the same
state as any defendant and the amount in controversy exceeds $75,000. See Hart v. FedEx Ground
Package Sys. Inc., 457 F.3d 675, 676 (7th Cir. 2006).
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the Governance Committee.” (Compl. (dkt. #1) ¶ 53.) Finally, during a meeting the
following April, the Board’s selections are typically re-elected.2 (Id.)
With respect to his own qualifications, Amoroso has been a practicing actuary for
more than 40 years.
He became a member of Sentry’s Audit Committee in 2003,
chairing it between 2006 and 2011. Amoroso further asserts that until his removal in
2014, Sentry’s Board of Directors had consistently included an actuary as a member
since the early 1980s.
C.
The Attorney-Client Privilege Memorandum
After a Board meeting on February 26, 2012, Amoroso alleges that defendants
Schuh or Erler developed three “scenarios,” each involving a director referred to only as
“Director X.” Those scenarios were then set forth in a memorandum titled “Application
of the Attorney-Client Privilege,” which was attached to another a memorandum titled
“Overview of the Attorney-Client Privilege and Work Product Doctrine.”
(Defs.’
Opening Br. Ex. A (dkt. #25-1) ECF 2.) An accompanying cover letter explains that the
two memoranda were being circulated in response to requests by “a number of Directors”
after the February 26 Board meeting for “updated information relating to the handling of
sensitive information, and the Attorney-Client Privilege.” (Id.) The cover letter further
explains that “[t]he second memo applies these concepts in specific situations and is self
explanatory.” (Id.)
To support his assertion that Board members are typically re-elected, plaintiff provides a table of
recent board members, several of whom he alleges have served for at least twelve years. (Compl.
(dkt. #1) ¶ 13.)
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Despite the expressly stated purposes of the memoranda, plaintiff nevertheless
asserts that the three scenarios “were prepared with false statements of fact in order to
disparage [him] and with the purpose . . . [of] inducing members of the Governance
Committee and Board of Directors to remove or not re-nominate [him] to the Board[.]”
(Compl. (dkt. #1) ¶ 17.)
Although the second memorandum only named a generic
“Director X,” plaintiff further asserts that the recipients knew he was the individual to
whom the memorandum referred. (Id. at ¶ 16.)
D.
The Three Scenarios
In the opening scenario set forth in the second memorandum, Director X “uses
unfortunate terminology describing [an] actuarial methodology” in emails sent to
auditors outside of the company, which is involved in litigation with the IRS. (Compl.
(dkt. #1) ¶ 18.) Plaintiff alleges that when he complained this scenario was inaccurate,
Erler informed him that Director X’s use of “unfortunate terminology” is actually
referring to Amoroso’s use of the term “cushion” in a first draft of a memo. (Id. at ¶ 19.)
Plaintiff asserts that this first scenario is still misleading because (1) “cushion” was
removed in the final version of the memo and (2) the term was used to describe
terminology in the insurance industry, not an actuarial methodology. (Id. at ¶ 23-24.)
In the memorandum’s second scenario, Director X calls an outside attorney
acquaintance to discuss his concerns with the fees paid by one of the company’s benefit
plans to an affiliated provider. (Id. at ¶ 25.) Plaintiff alleges that this scenario is also
based on his actions and is likewise misleading.
Specifically, plaintiff claims Schuh
encouraged him to call the attorney to discuss risks that Amoroso had identified at a
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meeting. Also, plaintiff alleges the discussion with the attorney concerned a particular
“immunization” strategy Sentry that was then considering, not whether the provider’s
fees were reasonable. (Compl. (dkt. #1) ¶ 32.)
In the third scenario, “Director X sends emails to other directors” after a Board
meeting considering changes in measures to evaluate management performance, which
“lay[es] out in detail his reasons for dissenting at the regular meetings, and further
explain[s] why he feels the [performance] measures being used are either not complete or
otherwise not proper.” (Id. ¶ 33.) As with the first two, plaintiff alleges that this scenario
was intended to reflect his conduct, though inaccurately. Instead, plaintiff alleges that
Schuh called him, along with the other members of the Board, to ask whether he had any
concerns regarding any Board matter. (Id. at ¶ 35.) After reporting his concerns and
suggestions, plaintiff claims Schuh asked him to prepare a memo, which he then
discussed with defendant Pearson. (Id. at ¶ 36.) Plaintiff further alleges that Pearson
told him to send the memo to the chair of the relevant committee and to copy Schuh.
(Compl. (dkt. #1) ¶ 36.)
These facts, plaintiff asserts, render the third scenario
inaccurate to the point of being “defamatory,” since it implies that Amoroso sent emails
reporting his concerns to other Board members on his own volition.
E.
Fallout from the Memorandum
Plaintiff alleges that Pearson, as Chairperson of the Board’s Governance
Committee, sent the privilege memoranda containing the three scenarios to every
member of Sentry’s Board on March 26, 2012. On April 6, 2012, Sentry’s Senior Vice
President Erler told Amoroso that he prepared the scenarios based on information
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provided by Schuh. On that same day, Amoroso claims he advised the Chairperson of
the Board and CEO Erler that the scenarios were untrue, and Erler said he would correct
the false statements, but never did so.
On April 8, 2012, Pearson also asked Amoroso to draft a short memo for the
Board to “correct” any inaccuracies in each scenario. The next day, Amoroso sent the
memo to Pearson’s wife and asked her to relay it to Pearson. At some point between
April 9 and April 27, 2012, Pearson then asked to meet with Amoroso. This meeting
with Pearson and Peter Pestillo, another member of the Governance Committee, took
place on April 27.
At that meeting, Amoroso was informed that the Governance
Committee would not correct the scenarios.
Plaintiff claims that as a result of these scenarios, he was only re-nominated in
November of 2012 and re-elected in April of 2013 to a one-year Board term, rather than
the typical three-year term. After the same thing happened at the Board meeting the
following November, 2013, Amoroso asked Pestillo why he was only being nominated for
a one-year re-election, rather than three years, to which Pestillo allegedly responded that
“the reason was continued concern about the Scenarios.” (Compl. (dkt. #1) at ¶ 48.)
The next year, November of 2014, Pearson and Pestillo told Amoroso shortly before the
Board meeting that the Governance Committee would not be re-nominating Amoroso at
all. The committee made that same announcement at the meeting, and Amoroso was not
re-elected.
Plaintiff generally alleges that Schuh created the false scenarios for the purpose of
defaming him and that Sentry’s President McPartland caused Erler and Pearson not to
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correct the misleading scenarios, although all three knew they were inaccurate. (Id. at ¶
58.) Plaintiff attributes defendants’ actions to Schuh and McPartland’s desire to replace
him on the Board with someone who would not challenge their management policies, a
desire that he alleges Erler and Pearson were aware. (Id. at ¶ 59-60.) Plaintiff further
contends that such actions were not without precedent, since McPartland, with the help
of Erler, orchestrated the removal of another Board member who questioned
McPartland’s management in 2013. (Id. at ¶ 62.)
Finally, in further support of his
allegations concerning defendants’ motives, plaintiff claims that the “current lead
Director,” Pestillo, told him that the Board needed someone with “social media
marketing skills” and that it was logistically simpler to replace him rather than add
another director to the Board. (Compl. (dkt. #1) at ¶ 66.)
OPINION
“A motion to dismiss under Federal Rule of Civil Procedure 12(b)(6) challenges
the sufficiency of the complaint for failure to state a claim upon which relief can be
granted.” Diamond Ctr., Inc. v. Leslie’s Jewelry Mfg. Corp., 562 F. Supp. 2d 1009, 1013
(W.D. Wis. 2008).
In “[e]valuating the sufficiency of the complaint, [the court]
construes it in the light most favorable to the nonmoving party, accept[s] well-[pleaded]
facts as true, and draw[s] all inferences in her favor.” Cincinnati Life Ins. Co. v. Beyrer, 722
F.3d 939, 946 (7th Cir. 2013). A plaintiff need not provide detailed factual allegations,
but must provide enough facts to state a claim that is plausible on its face and allow the
“court to infer more than the mere possibility of misconduct.” Ashcroft v. Iqbal, 556 U.S.
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662, 679 (2009).
Under Wisconsin law, a defamation claim that does not involve a public figure
must allege three elements:
(1) a false statement; (2) communicated by speech, conduct
or in writing to a person other than the person defamed; and
(3) the communication is unprivileged and tends to harm
one’s reputation so as to lower him or her in the estimation of
the community or to deter third persons from associating or
dealing with him or her.
In re Storms, 2008 WI 56, ¶ 38, 309 Wis. 2d 704, 750 N.W.2d 739. Even if a defendant
is not the original source of a defamatory statement, repeating or republishing
defamatory statements made by others can still lead to liability for defamation. Hart v.
Bennet, 2003 WI App 231, ¶ 25, 267 Wis. 2d 919, 672 N.W.2d 306 (“One who repeats
or otherwise republishes defamatory matter is subject to liability as if he had originally
published it.”) (quoting Restatement (Second) of Torts § 578 (1977)).
Defendants move to dismiss the complaint on three grounds: (1) the statements
that form the basis for plaintiff’s defamation claim are incapable of having a defamatory
meaning; (2) the statements at issue are conditionally privileged; and (3) plaintiff’s
alleged injury is not cognizable under the law of defamation. The court rejects each
ground as set forth below.
I.
Defamatory Meaning
“Whether a particular communication is capable of a defamatory meaning is a
question of law.” Uebelacker v. Paula Allen Holdings, Inc., 464 F. Supp. 2d 791, 800 (W.D.
Wis. 2006) (emphasis added) (citing Lathan v. Journal Co., 30 Wis. 2d 146, 153, 140
8
N.W.2d 417, 421 (1966)). Dismissal is warranted only if the “communication cannot
reasonably be understood as defamatory[.]” Starobin v. Northridge Lakes Dev. Co., 94 Wis.
2d 1, 10, 287 N.W.2d 747 (1980). In determining whether a statement is capable of a
defamatory meaning, the court must examine the plain language of the statement “in the
context of the communication as a whole.”
Hy Cite Corp. v. Regal Ware, Inc., No.
10-cv-168-wmc, 2011 WL 1206768, at *6 (W.D. Wis. 2011) (citing Westby v. Madison
Newspapers, Inc., 81 Wis. 2d 1, 6, 259 N.W.2d 691 (1977); Frinzi v. Hanson, 30 Wis. 2d
271, 276, 140 N.W.2d 259 (1962)). To be defamatory, a statement’s plain meaning
must tend to harm the plaintiff’s reputation “so as to lower him or her in the estimation
of the community or to deter third persons from associating or dealing with him or her.”
Hart, 2003 WI App 231 at ¶ 21.
Here, plaintiff alleges that false statements were made about him in each of the
three scenarios purporting to reflect actions of a hypothetical director, but written so as
to make him easily identifiable to the recipients of the memorandum as “Director X.” A
statement does not need to explicitly name a particular individual to be defamatory as
long as it “refers to a person whose identity is ascertainable.” Wildes v. Prime Mfg. Corp.,
160 Wis. 2d 443, 448, 465 N.W.2d 835 (Ct. App. 1991); cf. Ogren v. Emp’rs Reinsurance
Corp., 119 Wis. 2d 379, 382, 350 N.W.2d 725 (1984) (“[O]ne who publishes
defamatory matter concerning a group or class of persons is liable to an individual
member only if (a) the group or class is so small that the matter can be reasonably
understood to refer to the member, or (b) the circumstances of publication give rise to
the conclusion that there is particular reference to the member.”) (citing Restatement
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(Second) of Torts § 564A (1977)); Restatement (Second) of Torts § 564 cmt. d (1977)
(“The fact that the author or producer states that his work is exclusively one of fiction
and in no sense applicable to living persons is not decisive if readers actually and
reasonably understand otherwise.”).
Whether Amoroso is ascertainable in the scenarios presents a much closer
question than in De Witte v. Kearney & Trecker Corp., 265 Wis. 132, 60 N.W.2d 748
(1953), in which the Supreme Court of Wisconsin held that a letter referencing every
member of a group of four officers of a union to which the individuals who received the
letter belonged could be defamatory. Id. at 137-38. Accordingly, plaintiff’s reliance on
De Witte only takes him so far. That said, plaintiff’s allegations that the recipients would
have reasonably known that the hypothetical director was intended to refer to him are
sufficient at this stage, although not by much. Plaintiff’s argument that the recipients of
the memorandum containing the scenarios were able to “triangulate” him because each
concerned a “Director X,” instead of say “Director X,” “Y” and “Z” is relatively weak, but
plaintiff also alleges that each of the scenarios were based on similar statements he made
in the presence of other Board or committee members, although misleadingly so, it is
arguable that the recipients could have reasonably inferred that “Director X” was actually
Amoroso.
Additionally, plaintiff alleges that at least one member of the Governance
Committee told him that he was only renewed for one year, rather than the typical three,
because of lingering concerns generated about him by the scenarios memo.
These
allegations, while far from ironclad, are enough to support a reasonable inference that
Amoroso was ascertainable as Director X in each of the three scenarios.
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In addition to being attributable to Amoroso, however, the statements in the
scenarios must also be capable of harming his reputation in order to be actionable.
Plaintiff argues that the three scenarios misleadingly implied that, respectively: (1) he
used terminology in an email to an outside party that could be used against the company
in future litigation; (2) he called an outside attorney to address matters that could
potentially result in a waiver of the attorney-client privilege; and (3) he independently
sent an email to other Board members that arguably contain admissions of the company
contemplating illegal activity. Admittedly, plaintiff must read somewhat between the
lines of the actual, “hypothetical” scenarios to tease out these allegedly defamatory
statements, but “[o]ne may be libeled by implication and innuendo quite as easily as by
direct affirmation.” Frinzi v. Hanson, 30 Wis. 2d 271, 277, 140 N.W.2d 259 (1966).
The court agrees with plaintiff that each of these statements may reasonably lower
his reputation, at least as he alleges Board members would interpret them, since they
each implicate trustworthiness, professional judgment and appreciation of confidentiality
and fiduciary duties. See Converters Equip. Corp. v. Condes Corp., 80 Wis. 2d 257, 263,
258 N.W.2d 712 (1977) (words charging dishonorable, unethical or unprofessional
conduct are capable of a defamatory meaning).
Defendants argue that plaintiff’s
interpretation of the scenarios is “unnaturally sensitive and forced” because they
presented at worst an anonymous individual who did not “fully appreciate the scope of
the attorney-client privilege and the potential waiver issues” (Defs.’ Opening Br. (dkt.
#25) at 7), but particularly when read in combination, the scenarios could reasonably
suggest impairment of professional judgment in a manner more material than defendants
11
are willing to acknowledge. Defendants also argue that read in context, no recipient
would consider the scenarios to even implicitly refer to any actual events or misconduct
committed by any particular director, much less plaintiff, since the memo was designed
to address requests for legal advice about the scope of the attorney-client privilege by
presenting specific applications of that privilege. Fair enough, but again context matters;
otherwise defamatory statements cannot be rendered non-actionable simply because they
are incorporated into a larger communication having a proper purpose.
Defendants further argue that the statements to which plaintiff points cannot be
defamatory because they served a valid business purpose, citing Rubenstein v. University of
Wisconsin Board of Regents, 422 F. Supp. 61 (E.D. Wis. 1976). In Rubenstein, the district
court granted a motion to dismiss because the defendant’s opinion that the plaintiff was
“not suitable for promotion” was “fair comment and not slanderous.” Id. at 64. This
case is distinguishable from Rubenstein, however, since instead of claiming that the
scenarios were intended to convey an opinion about whether Amoroso was suitable for
the director position, defendants argue that the scenarios did not refer to any specific
individual and were intended not to opine on plaintiff’s individual conduct, but to be
instructive generally.
Of course, defendants may well be able to establish a “valid
business purpose” exception on summary judgment by presenting undisputed facts that
the authors of the memorandum were offering innocent scenarios without plaintiff in
mind for the Board’s general edification or derived scenarios very much with plaintiff’s
conduct in mind for the Board’s specific edification. As to the latter, plaintiff may also
have a difficult time proving on summary judgment the scenarios were materially
12
misleading, since he at least proposed the questionable language in scenario 1, and
apparently engaged in the conduct attributed to him in scenarios 2 and 3 as an
independent director, or closely analogous conduct, albeit a corporate officer. At this
stage, however, plaintiff has adequately alleged that the statements he identifies are
capable of being defamatory, if just barely.
II.
Common Interest Privilege
Next, defendants move to dismiss plaintiff’s defamation claims on the basis of the
common interest privilege.
The common interest privilege protects “defamatory
statements . . . which are made in furtherance of common property, business, or
professional interests” and is extended to partners and officers of a corporation. Zinda v.
La. Pac. Corp., 149 Wis. 2d 913, 923, 440 N.W.2d 548 (1989) (citing Restatement
(Second) of Torts § 596 cmt. d (1977)).
A defendant loses the protection of the
common interest privilege, however, when he abuses it. See id. at 924. Generally, abuse
of the common interest privilege occurs when the publisher knows the defamatory matter
is false or recklessly disregards that possibility or when he or she publishes it for some
improper purpose. See id. at 924-25 (citing Restatement (Second) of Torts § 596 cmt. a
(1977)).
Although perhaps ultimately defendants’ strongest defense, a request that the
court find the common interest privilege applies as a matter of law is premature. Since
the conditional privilege is an affirmative defense, plaintiff need not overcome it with the
allegations in his complaint. See Quinn v. Overnite Transp. Co., 24 F. App’x 582, 586 (7th
Cir. 2001); Emiabata v. Marten Trans., Ltd., 574 F. Supp. 2d 912, 919 (W.D. Wis. 2007)
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(citing Wisconsin v. Gilles, 173 Wis. 2d 101, 496 N.W.2d 133, 138 (Ct. App. 1992)).
Rather, the burden of proof on the question of whether the conditional privilege applies
only shifts to the plaintiff after the court determines that defendants are correct that a
conditional privilege exists. Zinda, 149 Wis. 2d at 926; see also Calero v. Del Chem. Corp.,
68 Wis. 2d 487, 499, 228 N.W.2d 737 (1975).
The parties dispute whether a district court can find that the common interest
privilege exists and dismiss a case at the pleading stage on that basis, with defendants
citing Verfuerth v. Orion Energy Systems, Inc., 65 F. Supp. 3d 640 (E.D. Wis. 2014), and
plaintiffs citing Wesbrook v. Ulrich, 90 F. Supp. 3d 803 (W.D. Wis. 2015), as well as
Emiabata. Regardless of which party has the better argument, however, the court agrees
with plaintiff that he has sufficiently alleged facts to support a reasonable inference that
defendants abused the common interest privilege for their own purposes, as opposed to
those of the company, making dismissal based on that privilege at this preliminary stage
inappropriate. Specifically, plaintiff alleges that defendants knew about the falsity of the
statements in the scenarios before publishing them and sought to force plaintiff off of the
Board of Directors because he was too critical of their management of the company. At
this stage, those allegations are enough for plaintiff to survive defendants’ motion to
dismiss, although the court would be remiss not to point out that plaintiff will likely
encounter significant difficulty in overcoming the common interest privilege after further
development of the record as well.
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III.
Cognizable Injury
Finally, defendants argue that plaintiff has not alleged a cognizable injury because,
like the plaintiff in Quinn, he focuses on the loss of his position rather than reputational
harm.
In Quinn, the Seventh Circuit affirmed the district court’s dismissal of the
plaintiff’s defamation claim because while the loss of his job resulting from a superior’s
accusation that he was sleeping on the job was “certainly an injury,” it was “not a harm
to reputation compensable under defamation law,” since “a single accusation of tardiness
does not rise to the level of actionable harm to reputation.”
24 F. App’x at 586.
Tempting though it may be, the court is again unable to dismiss plaintiff’s claims at the
motion to dismiss stage, because unlike in Quinn, the multiple, allegedly defamatory
statements made by defendants here were arguably severe enough to state a claim for
reputational harm, not just the loss of his position on the Board. See Converters Equip.
Corp., 80 Wis. 2d at 263; Wesbrook, 90 F. Supp. 3d at 812 (“[F]alse information about a
climate of fear and intimidation and administrative and leadership failures arguably are
obviously capable of a defamatory meaning, since both create a poor working
environment for employees and indicate a deficient management style, which could easily
harm one’s professional reputation.”).
ORDER
IT IS ORDERED that:
(1) defendant’s motion to dismiss (dkt. #24) is DENIED; and
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(2) the matter is referred to Magistrate Judge Stephen Crocker to set an expedited
schedule for any remaining discovery, summary judgment deadline and trial.
Entered this 30th day of September, 2017.
BY THE COURT:
/s/
WILLIAM M. CONLEY
District Judge
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