Opinion
No. ED88237
June 19, 2007
Appeal from Circuit Court of St. Louis County, Hon. John A. Ross.
Dawn M. Johnson and Robert L. Duckels, Counsel for Appellant.
Joseph R. Dulle, Counsel for Respondent.
Opinion
BP Products North America, Inc. ("Defendant") appeals the judgment finding Defendant liable for injurious falsehood and awarding damages to Advanced Cleaning Technologies and Brian Wandersee ("Plaintiffs"). We reverse the judgment and remand for entry of judgment notwithstanding the verdict in favor of Defendant.
I. BACKGROUND
In 1997, Defendant ordered three car wash machines from a manufacturer to be installed by Advance Cleaning Technologies ("ACT"), a distributor and installer of car wash systems. Two of these machines were installed while a third machine ("the Machine") remained in ACT's warehouse, having been ordered for a station that was never built. ACT's owner and president, Brian Wandersee ("Wandersee") alleges he informed Defendant's St. Louis account executive ("Account Executive") that the Machine was in storage. Wandersee further alleges that, in response, Account Executive stated that the Machine was "not in her budget" and that she did not know who he should contact.
Plaintiffs contend it was standard practice for ACT to receive car wash machines for Defendant before installation. ACT does not contend it ever paid for such machines.
In 1999, Defendant's regional security advisor ("Security Advisor") received a call from a former ACT employee, informing him that Wandersee was attempting to sell the Machine. Security Advisor investigated the claim, verifying serial numbers and inquiring whether the machine had been installed. Having determined he should notify the authorities, Security Advisor contacted police and stated that Wandersee had "unauthorized possession" of the Machine and that its purchase order had been falsified by a former employee of Defendant who went to work for ACT.
Our review of Plaintiffs' allegations is limited to those submitted at the trial level.
Police investigated and searched ACT's warehouse. Having recovered parts of the Machine at the warehouse, police arrested Wandersee the following day. The case was taken before a grand jury and the grand jury indicted Wandersee for stealing more than $750. Ultimately the prosecutor filed a nolle prosequi, choosing not to prosecute due to issues of witness credibility.
Plaintiffs filed suit for injurious falsehood, contending that Security Advisor's statements to police were false and that as a consequence of those statements, ACT lost customers, ACT's line of credit was frozen, ACT was forced to provide more collateral to secure a loan, and both ACT and Wandersee incurred accounting and attorney fees. Defendant moved for a directed verdict, asserting, in part, that Plaintiffs failed to prove essential elements of injurious falsehood. The trial court denied Defendant's motion and entered judgment in favor of Plaintiffs, awarding $605,350 in damages against Defendant, in accordance with the jury's verdict. Defendant filed a post-trial motion requesting a judgment notwithstanding the verdict based on the failure of necessary elements of Plaintiffs' injurious falsehood claim or a new trial based on instructional error or error regarding the measure of damages. The trial court denied Defendant's motion. Defendant appeals.
II. DISCUSSION
In reviewing whether the trial court's denial of a defendant's motion for judgment notwithstanding the verdict was error, we must determine whether the plaintiff made a submissible case. Echard v. Barnes-Jewish Hosp., 98 S.W.3d 558, 565 (Mo.App.E.D. 2002). "In order to make a submissible case a plaintiff must present substantial evidence for every fact essential to liability." Id. In making this determination, we view the evidence and all reasonable inferences to be drawn therefrom in the light most favorable to the plaintiff. Id.
Defendant asserts multiple allegations of error. Specifically, Defendant alleges the trial court erred in: 1) denying Defendant's motion for judgment notwithstanding the verdict based on a failure of Plaintiffs to prove essential elements of their injurious falsehood claim; 2) omitting the definition of reckless disregard from its instructions to the jury; and 3) awarding unsupported damages. While we agree that the trial court erred in its jury instructions and damages award, we need not analyze these points because Defendants prevail on their first argument. As discussed below, the trial court improperly submitted this case to the jury in that Plaintiffs failed to present substantial evidence to support necessary elements of injurious falsehood, namely Defendant's mental state.
We choose not to address the sufficiency of the causal nexus between Defendant's publication and Plaintiffs' damages.
The Restatement (Second) of Torts, Section 623A (1977) sets out the elements of the tort of injurious falsehood in Missouri. It provides:
One who publishes a false statement harmful to the interests of another is subject to liability for pecuniary loss resulting to the other if
(a) he intends for publication of the statement to result in harm to interests of the other having a pecuniary value, or either recognizes or should recognize that it is likely to do so, and
(b) he knows that the statement is false or acts in reckless disregard of its truth or falsity.
A review of the record reveals Plaintiffs failed to prove either that Defendant knew its statements to police were false or acted with a reckless disregard for the truth of its statements. Plaintiffs implore this court to focus on Defendant's knowledge as a corporation. Plaintiffs state that Defendant is a "corporate entity charged with the knowledge of all of its employees and records" and cite to the Restatement (Second) of Agency, Section 212 cmt. c (1958) for the proposition that "[t]he master may be liable . . . in those cases in which liability is based upon knowledge of facts which the master has but which the servant does not have." While Plaintiffs' enunciation of the Restatement of Agency is accurate, their contention regarding Defendant's knowledge of all of its employees and records overreaches.
Plaintiffs appear to assert that Defendant as a corporation should be imputed with the knowledge that Security Advisor's statements to police were false because Wandersee told Account Executive that the Machine was in his warehouse or because an employee of Defendant may have possessed a record pertinent to Security Advisor's statements. Plaintiffs ask this Court to conclude that a corporation has actual knowledge of a falsity when one employee makes a statement that conflicts with another employee's knowledge, learned in an unrelated circumstance. Missouri law does not support such a conclusion.
This should be distinguished from the instance where one employee both knows of a falsity and makes a false statement.
In Southwest Bank of Polk County v. Hughes, 883 S.W.2d 518 (Mo.App. S.D. 1994), the Southern District discussed agency theory and determined that a party lacked knowledge of fraud where one agent knew some facts that would indicate fraud when coupled with others. The Court stated, "The principal is not affected by information acquired by an agent which seems irrelevant to him because he does not know that . . . another agent of the principal is transacting business in which such knowledge is relevant. Id. at 525 (quoting the Restatement (Second) of Agency, Section 275, cmt. d (1958)).
The circumstances here are analogous. Wandersee testified that he told Account Executive, Defendant's employee, that the Machine was in his warehouse. Additionally, Plaintiff failed to show that Account Executive or any of Defendant's employees knew Security Advisor intended to contact the police or that any employees who may have known the Machine's status understood that information to be important. Account Executive's knowledge and the knowledge of any other employee cannot be a basis for liability where there is no evidence that they knew such information was relevant to Security Advisor's contacting the police. In addition, Plaintiffs do not suggest that any individual employed by Defendant knew that Security Advisor's statements were inaccurate. Consequently, Plaintiffs failed to prove that Defendant possessed actual knowledge of the falsity.
In addition, Plaintiffs failed to show that Defendant exhibited reckless disregard for the truth. Because "[d]efamation analysis applies to the tort of injurious falsehood," State ex. Rel. Diehl v. Kintz, 162 S.W.3d 152, 157 n. 4 (Mo.App.E.D. 2005), and because there is a dearth of injurious falsehood case law in Missouri, we turn to defamation case law. The United States Supreme Court has defined reckless disregard in the defamation context. "There must be sufficient evidence to permit the conclusion that the defendant in fact entertained serious doubts as to the truth of his publication. Publishing with such doubts shows reckless disregard for truth or falsity. . . ." St. Amant v. Thompson, 390 U.S. 727, 731 (1968) quoted in Englezos v. Newspress and Gazette Co., 980 S.W.2d 25, 33 (Mo.App.W.D. 1998). Similarly, the Missouri Supreme Court has followed this standard. The test is "whether the defendant in fact entertained [serious] doubts." In re Westfall, 808 S.W.2d 829, 836-37 (Mo. banc 1991) quoted in Englezos, 980 S.W.2d at 33.
Plaintiffs presented no evidence that Defendant entertained serious doubts about Security Advisor's statements. To the contrary, the record reflects that Security Advisor made a concerted effort to investigate, confirming serial numbers and contacting officers within his company to acquire information about the Machine. Plaintiffs did not show that Defendant possessed any reservations, much less serious doubts as to the truth of its publication. Therefore, Plaintiffs failed to prove that Defendants possessed a reckless disregard for the truth or falsity of its publication.
Because Plaintiffs produced no evidence indicating that Defendant knew its statements were false or that Defendant acted in reckless disregard of its statements' truth or falsity, as a matter of law, Plaintiffs failed to make a submissible case. "[W]hen a defendant's motion for judgment notwithstanding the verdict correctly identifies one or more required elements of the plaintiff's case which are not supported by the evidence, the motion should be granted." Mprove v. KLT Telecom, Inc., 135 S.W.3d 481, 493 (Mo.App.W.D. 2004). Accordingly, the trial court erred in denying Defendant's motion for judgment notwithstanding the verdict. Point granted.
III. CONCLUSION
The judgment is reversed and the case is remanded for entry of judgment notwithstanding the verdict in favor of Defendant.