The opinion of the court was delivered by: KNAPP
The complaint in this diversity lawsuit originally alleged claims for wrongful discharge, slander and libel against Printing Developments, Inc. ("PDI"), plaintiff's former employer, and Time Incorporated, of which PDI was a wholly owned subsidiary. (See Pirre v. Printing Developments, Inc. (S.D.N.Y.1977) 432 F. Supp. 840). Only two claims of libel were ultimately submitted to the jury, which returned a verdict dismissing the complaint against Time Incorporated but awarding damages totalling $ 445,000 against PDI.
Defendant PDI now attacks that verdict. It moves for a judgment notwithstanding the verdict on several grounds: (1) that there was no publication as a matter of law; (2) that defendant's conceded privilege in speaking of its employee was not overcome by competent evidence; and (3) that the doctrine of respondeat superior was inapplicable. Defendant also moves for a new trial on grounds that (1) we erroneously charged the jury on the nature of plaintiff's burden of proof with respect to malice, (2) that admission of some testimony, including testimony regarding the alleged slander, was prejudicial, (3) that the verdict was against the weight of the evidence, and (4) that the size of the damage award indicates that the jury was moved by prejudice or partiality. Finally, defendant asks that certain elements of damage be eliminated as a matter of law, and that all be reduced as excessive. It is our conclusion that certain elements of damage must be eliminated and others reduced but that defendant's motions should in all other respects be denied. We shall for the sake of convenience first discuss questions concerning damages and then take up the legal considerations posed by the motions for judgment notwithstanding the verdict and for a new trial.
The legal and discretionary questions presented by these motions can intelligently be discussed only against the background of a comprehensive review of the facts. Moreover, in order properly to appraise the jury's action in this case it is necessary to contrast the facts which based on the evidence before us we believe actually to have existed and the version of those facts as they appeared to the defendants and were by them presented to the jury.
(a) The facts which on the basis of the evidence before us we deem actually to have existed
Defendant Printing Development, Inc. ("PDI") a wholly owned subsidiary of Time Incorporated was, as its name implies, engaged in developing and selling specialized equipment useful in the printing trades. From about 1955 until about 1973 it had had great success in marketing a product called a "scanner", an instrument used in the reproduction of color photography. PDI's success, during the years mentioned, was due to the fact that the excellence of its product gave it a practical monopoly of the market.
Although PDI's engineers were responsible for the design of the product, they played no part in its manufacture, responsibility for which had been contracted out to a concern known as the Wendon Company. The relationship between PDI and Wendon was most informal. When PDI wished to create a new product or modify an old one it would not submit detailed plans and specifications to Wendon, but would provide Wendon with preliminary sketches and the details would be worked out as the product was manufactured.
Success of this informal ad hoc process of manufacture was primarily made possible by the skill and perspicacity of plaintiff John Pirre, who had the responsibility of acting as liaison between PDI and Wendon. He interpreted his employer's needs and desires to Wendon and kept the former advised of any problems that might be confronting the latter. Pirre was practically a mechanical and engineering genius. In addition he was and is a wholly engaging human being. In short, he was ideally suited to managing the informal relationship that existed between PDI and Wendon. But there was an Achilles' heel in his character. He was an extraordinarily sensitive man who had to do things in his own way, and was wholly incapable of conforming to any sort of structured discipline. Illustrative of this characteristic is the circumstance that during World War II when he was in the Navy he found discipline wholly intolerable, developed a serious ulcer and had to be released from service on a medical discharge.
A function of Pirre's sensitivity was that he was extremely allergic to criticism and if he were to function effectively had constantly to be praised by his superiors.
PDI's halcyon days came to an end when its competitors began to develop comparable products, and the handsome profits flowing from the scanner operation began to given way to losses. Time Incorporated, the parent company, reacted to this situation by putting in a new management team. For present purposes, the principal participants in this team, in order of their scale of authority, were Robert Sorenson, Brian Chapman and Alan Hahn.
For purposes of this lawsuit, perhaps the most important of these was Brian Chapman. He was a highly competent administrator, and like Pirre, had an engaging personality. But he, too, had an Achilles' heel which assumed significant proportions in the peculiar circumstances presented by this lawsuit. He had a tendency when under stress to confide in persons whom he thought of as friends. The recipients of his confidence did not always respect the confidentiality, and sometimes misunderstood his meaning.
So far as here relevant, the principal decisions made by new management were: (a) to tighten up procedures and substitute a more structured discipline for the old informality; and (b) to find an additional supplier for the scanner, thus eliminating the company's total dependence on Wendon.
Brian Chapman had been warned by Pirre's former superior, one Casanova, of Pirre's peculiar personality. Thus, in describing his original briefing by Casanova about Pirre, Chapman testified:
"And with regard to Mr. Pirre, he (Casanova) told me generally he could do a good job but did require an inordinate amount of praising and very careful couched terms to him correctly, et cetera, so as not to get him going, that if you did this you could get good work out of him."
However, recognizing his tremendous values both technical and human Chapman was determined to adjust himself to Pirre's personality. At first, he seemed to be succeeding.
According to the testimony of both men, Pirre and Chapman seemed to recognize each others' qualities and to consider each other as friends (in other words Pirre was a man in whom Chapman thought he could confide). The rift in the lute inevitable in the circumstances was precipitated by totally irrelevant events surrounding another PDI employee named Frank Labazzo.
One of new management's decisions had been to close down a building of which Labazzo had been superintendent. The building was not to be replaced and the company had no further use for Labazzo's services as building manager. However since Labazzo had been an old and valued employee and was immensely popular with his fellows management tried to salvage the situation by converting him into a purchasing agent. However, since Labazzo was not qualified for his new assignment, the attempted conversion proved a failure and in January of 1974 Sorenson directed Chapman to fire Labazzo. Chapman, foreseeing that the dismissal would create a storm of protest, argued that regardless of Labazzo's lack of productivity it was worth keeping him just to avoid trouble. Sorenson, reasoning that keeping the man in unproductive work was unfair to him in that it would ultimately unfit him for other employment, insisted that Chapman dismiss Labazzo. Chapman, having no choice, followed instructions.
As Chapman had foreseen, massive protests resulted. Moreover all the employees and especially Pirre thought the decision to fire had been Chapman's, regarded him as the hatchet man, and began to develop a hatred for him. A few days after the firing, Chapman wandered into Pirre's office and noticed a picture of Labazzo on the wall. Thinking he was with a friend and feeling under stress, he allowed himself to muse "I wonder who will be next". As he had just been overruled on a fairly important issue and as the new management didn't seem to be doing too well, he may well have been wondering whether or not he himself would be "next". But Pirre, who knew nothing of Chapman's inner turmoil and who had begun to hate him, interpreted the remark as a direct threat that Pirre would be Chapman's next victim. From that moment on the relationship between the two men worked itself out to its final denouement with the inevitability of Greek tragedy.
There was a fallout from the Labazzo incident which was to have future repercussions. In order to calm Labazzo's outraged fellow workers, PDI management took steps to reassure them that there would be no further precipitous firings. Among other things, they announced that Time's labor practices would henceforth be enforced at PDI, and specified that no employee could thereafter be fired for cause until he had received two warning letters. Such formality had been quite foreign to PDI practices, and apparently none of the new management had had much experience with "warning letters".
So far as the evidence reveals, the next episode affecting Pirre occurred about three months later, when he was due one of his periodic evaluation reports. By that time Chapman had come to realize the impossibility of fitting Pirre into a structured operation and had begun to think about ways and means of terminating his employment. Having had no experience with "warning letters" he decided on a trial run and composed a memorandum to Sorenson (copy to Hahn) setting forth various ways Pirre would have to improve if he was to keep his job. As this memorandum was never intended to be seen by anyone but Sorenson and Hahn (it in fact was never seen by anyone else until it surfaced in the course of pre-trial discovery) and was not intended to perform any function other than practice in composition, Chapman did not discuss it with anyone and took no particular pains with respect to its accuracy.
While Chapman had given up on him, Pirre's immediate superior, Alan Hahn, who was charged with making the evaluation, still had hope for him. Hahn accordingly prepared himself with great care for his evaluation interview with Pirre. He set forth in great detail Pirre's many undoubted accomplishments; and proceeded with great delicacy in areas where his work had met with criticism, trying to make tactful suggestions as to how Pirre could accommodate himself to the more structured situation in which he found himself. Pirre gladly lapped up the praise but flew into a rage at the slightest criticism, demanding to confront those who had found his work wanting. Hahn said he would try to arrange such a confrontation. However, when Hahn told Chapman of the problem, the latter concluded that such a confrontation would be futile and directed Hahn to forget the matter. Upon learning of Chapman's decision, Pirre became furious, accused Hahn of being Chapman's pawn and asserted that Hahn's original criticisms had not been his own but had been dictated by Chapman. When Hahn denied this, assuring Pirre that his criticism had been his own genuine efforts to help Pirre make necessary adjustments, Pirre in the presence of other employees called Hahn a liar. Upon learning of this episode, Chapman concluded that he had had enough, and composed and delivered to Pirre his first "warning letter." Not intended for general circulation, this letter was not carefully composed and contained a wholly unsupportable charge that Pirre had refused a direct command from his superiors.
Following a protest by Pirre to PDI's president, Robert Edmondson, a meeting was arranged between Pirre, Hahn, Chapman and Sorenson. The meeting proved inconclusive. Pirre wanted a withdrawal of the warning letter. The PDI representatives, with the possible exception of Chapman, were anxious to pacify Pirre and get him back to work on a constructive basis. Sorenson was not, however, prepared to require Chapman to withdraw the warning letter. Sorenson suggested a formula which seemed to him to satisfy everyone's legitimate concerns: Pirre would go back to work and develop a record meriting a raise in salary, which raise would have the effect of nullifying the warning letter. The meeting adjourned with everyone apparently happy with that formula. The next day, however, when Pirre began fully to grasp that the warning would not be formally withdrawn, he lodged outraged protests with all concerned. The record does not indicate how if at all this dispute was ever resolved.
About three months later in June of 1974 Hahn was relieved of his responsibilities of supervising Pirre, which task was assigned to one Jack Andel. By this time PDI had found its second source of supply, a well-established firm called "Air Lock" which had developed a reputation for its work as subcontractor for various NASA air space projects. Needless to say, its work for NASA had not been on the informal ad hoc basis to which PDI was accustomed. Indeed, nothing in Air Lock's experience had prepared it for that type of relationship. Another complicating factor was that Air Lock had been selected by Chapman who as PDI management was well aware happened to be distantly related to one of its reasonably important employees.
Working under Andel, Pirre's responsibilities were enlarged to include liaison work with Air Lock. This arrangement did not work out well. As indicated, nothing in Air Lock's experience had prepared it for PDI's informal ways, and it soon found itself exasperating PDI management by failure to make deliveries on time. Pirre's personality was ill-suited to serving as a buffer between a dissatisfied customer and a frustrated supplier. So, instead of performing any useful liaison functions, he simply exacerbated the situation.
This generally untenable situation became explosive on October 17, 1974. Prior to that day Andel and Pirre had agreed that, in order to deal with Air Lock's critical arrearages, Pirre and his assistant Tom Melsopp should make themselves available at the Air Lock plant whenever its management should request their assistance; and Andel had advised Air Lock management of this decision. In the afternoon of October 17 an Air Lock official, acting on this advice from Andel, requested Melsopp to report to Air Lock the next morning. Pirre was outraged that any Air Lock employee would presume to give directions to His assistant, and countermanded the order. Apprized of this, Andel phoned Pirre and after the two had engaged in a heated argument in the course of which Pirre used language Andel found to be offensive peremptorily ordered Pirre to instruct Melsopp to report for work at Air Lock at the beginning of business on the following day. Pirre passed these instructions on to Melsopp but, hoping for another opportunity to dissuade Andel, varied them to the extent of telling Melsopp to stop off at the PDI office the next morning so that they could go together to Air Lock. The stopover at PDI proved more significant than anticipated. Pirre spent most of the morning arguing with Andel and others, and Melsopp did not get to Air Lock until the next morning.
This episode triggered a second or "final" warning letter, this time written by Andel. Like the first, it was clumsily drafted and contained statements difficult if not impossible fully to support. It ended on the following pious note: "It is deeply hoped that improvement in all the above areas will be evident in order to preclude termination."
Andel delivered the original to Pirre, and made copies available to Chapman, Sorenson, Hahn, and Edmondson. Edmondson in turn sent copies to Robert Steed and Lucy Werner at Time Incorporated.
Pirre quickly made this warning known to his fellow employees and it crystalized a revolt against Chapman which had apparently been brewing ever since the Labazzo incident. Without going into the details of this revolt, suffice it to say that it ended in a confrontation with management in which the employees insisted that Pirre's warning letter be withdrawn, and that Chapman be fired. Sorenson, who represented management in the dispute, ultimately decided to reject both demands and determined in his own mind that Pirre would have to be terminated. ...