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NO. 01-0734 ________________________________________ IN THE SUPREME COURT OF TEXAS ________________________________________ MINYARD FOOD STORES, INC., Petitioner v. BRENDA GOODMAN, Respondent On appeal from the Court of Appeals for the Second District of Texas at Fort Worth No. 2-99-360-CV ________________________________________ PETITIONER MINYARD FOOD STORES, INC.'S BRIEF ON THE MERITS ________________________________________ Bryant S. McFall Texas Bar No. 00784556 Andrew T. Turner Texas Bar No. 24008968 Ron Chapman, Jr. Texas Bar No. 00793489 Ogletree, Deakins, Nash, Smoak & Stewart, P.C. 700 Preston Commons 8117 Preston Road Dallas, Texas 75225 (214) 987-3800 (214) 987-3927 (Fax) ATTORNEYS FOR PETITIONER MINYARD FOOD STORES, INC.

IDENTITY OF PARTIES AND COUNSEL Attorney for Brenda Goodman William Paul Rossini, Esq. Vial, Hamilton, Koch & Knox 1717 Main Street Suite 4400 Dallas, TX 75201 Attorneys for Les Heflin C. Timothy Reynolds, Esq. Law Office of Joel J. Steed 5910 N. Central Expressway, Suite 650 Dallas, TX 75206 Trial Attorneys for Sheila Hughes, Alexandra Marks, and Minyard Food Stores, Inc. Tricia Martin, Esq. Burford & Ryburn, L.L.P. 3100 Lincoln Plaza 500 N. Akard Dallas, TX 75201-6697 Appellate Attorneys for Minyard Food Stores, Inc. Bryant S. McFall Andrew T. Turner Ron Chapman, Jr. Ogletree, Deakins, Nash, Smoak & Stewart, P.C. 700 Preston Commons 8117 Preston Road Dallas, Texas 75225 (214) 987-3800 (214) 987-3927 (Fax)

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TABLE OF CONTENTS

STATEMENT OF THE CASE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . v STATEMENT OF JURISDICTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . vi ISSUE PRESENTED . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . vii STATEMENT OF FACTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 SUMMARY OF THE ARGUMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 ARGUMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 A. B. C. D. Standard of Review . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 No Evidence of Course and Scope . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 The Majority Opinion Creates an Untenable Rule of Law for Texas Employers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12 Texas Does Not Utilize a Different, Less-Stringent Standard for Respondeat Superior Liability in Defamation Cases . . . . . . . . . . . . . . . . . 17

PRAYER . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22 CERTIFICATE OF SERVICE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23 APPENDIX . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24

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INDEX OF AUTHORITIES

Bartkowiak v. Quantum Chem. Corp., 35 S.W.3d 103 (Tex. App.­Amarillo 2000, no pet.) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12 Browning-Ferris, Inc. v. Reyna, 865 S.W.2d 925 (Tex. 1993) . . . . . . . . . . . . . . . . . . . . . 5 Burlington Indus., Inc. v. Ellerth, 524 U.S. 742, 118 S. Ct. 2257 (1998) . . . . . . . . . 12, 14 Dinkins v. Charoen Pokphand USA, Inc., 133 F. Supp 2d 1237 (M.D. Ala. 2001) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14 Grapevine Excavation, Inc. v. Maryland Lloyds, 35 S.W.3d 1 (Tex. 2000) . . . . . . . . . . 11 GTE Southwest, Inc. v. Bruce, 998 S.W.2d 605 (Tex. 1999) . . . . . . . . . . . . . . . . . . . . . 20 Heiser v. Eckerd Corp., 983 S.W.2d 313 (Tex. App. ­ Ft. Worth 1998, no pet.) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3, 5, 19-20 Hooper v. Pitney Bowes, Inc., 895 S.W.2d 773 (Tex. App.­Texarkana 1995, writ denied) . . . . . . . . . . . . . . . . . . . . . . . . . . . 3, 5-7, 19-21 ITT Consumer Fin. Corp. v. Tovar, 932 S.W.2d 147 (Tex. App.­El Paso 1996, writ denied) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3, 7 Lyon v. Allsup's Convenience Stores, Inc., 997 S.W.2d 345 (Tex. App.­Fort Worth 1999, no writ) . . . . . . . . . . . . . . . . . . . . . . . . 2-3, 5, 7- 11, 19-20 Madison v. IBP, Inc., 257 F.3d 780 (8th Cir. 2001) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14 McKnight v. Hill & Hill Exterminators, 689 S.W.2d 206 (Tex. 1985) . . . . . . . . . . . . . . . 5 Miller v. Woodharbor Molding & Millworks, Inc., 80 F. Supp. 2d 1026 (N.D. Iowa 2000) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15 Minyard Food Stores, Inc. v. Goodman, 50 S.W.3d 131 (Tex. App.­Ft. Worth 2001, writ pending) . . . . . . . . . . . . . . . . . . . . . . . . . vi, 1, 2, 6-7, 13 Randall's Food Markets, Inc. v. Johnson, 891 S.W.2d 640 (Tex. 1995) . . . . . . . . . 13-14

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Rausman v. Baugh, 248 A.D.2d 8 (N.Y. App. Div. 1998) . . . . . . . . . . . . . . . . . 12, 15-17 Rodriguez v. Sarabyn, 129 F.3d 760 (5th Cir. 1997) . . . . . . . . . . . . . . . . . . . . . . 18, 20-21 Saenz v. Fidelity Sec. Ins. Co. of Am., 786 S.W.2d 110 (Tex. App.­San Antonio 1990, no writ) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7 Smith v. First Union Nat'l Bank, 202 F.3d 234 (4th Cir. 2000) . . . . . . . . . . . . . . . . . . . . 14 Texam Oil Corp. v. Poyner, 436 S.W.2d 129 (Tex. 1968) . . . . . . . . . . . . . . . . . 18-19, 21 Wagner v. Caprock Beef Packers, Co., 540 S.W.2d 303 (Tex. 1976) . . . . . . . . . 12, 19, 21 Wal-Mart Stores, Inc. v. Lane, 31 S.W.3d 282 (Tex. App.­Corpus Christi 2000, pet. denied) . . . . . . . . . . . . . . . . . . . . . . . . . 7, 12-13, 20

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STATEMENT OF THE CASE Brenda K. Goodman sued Les Heflin and Minyard Food Stores, Inc. for slander.1 The case was tried to a jury in the 16th Judicial District Court, Denton County, the Honorable John Narsutis presiding, on June 1 through June 3, 1999. The jury found Heflin slandered Goodman during the course and scope of his employment with Minyard and held Heflin and Minyard jointly and severally liable to Goodman for $325,000 in compensatory damages. On June 25, 1999, Minyard filed its Motion for Judgment Non Obstante Verdicto, which the trial court overruled on August 12, 1999, by entering judgment against Heflin and Minyard. On September 7, 1999, Minyard filed its motion for new trial, which the trial court denied on October 20, 1999. On November 10, 1999, Minyard posted a $442,917.40 supersedeas bond to stay enforcement of the trial court's judgment pending the outcome of this appeal and timely filed its notice of appeal. On June 28, 2001, the Court of Appeals for the Second District of Texas at Ft. Worth affirmed the judgment of the trial court in a 2-1 opinion authored by Justice Lee Ann Dauphinot and joined by Justice Dixon Holman. Chief Justice John H. Cayce, Jr. authored a concurring and dissenting opinion. Both opinions are published. See Minyard Food Stores, Inc. v. Goodman, 50 S.W.3d 131 (Tex. App.­Ft. Worth 2001, writ pending).

Goodman also sued Alejandra Marks and Sheila Hughes. The jury found Marks and Hughes did not slander Goodman, and the trial court entered judgment in their favor. They were not parties to the ensuing appeal.

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STATEMENT OF JURISDICTION This Court has jurisdiction pursuant to Tex. R. App. P. 53.1.

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ISSUE PRESENTED During Minyard's investigation into complaints of Heflin's behavior, Heflin lied to Minyard about Goodman by saying he kissed her thereby defaming her. Is an employee who lies to his employer when he is being investigated for workplace misconduct acting within the course and scope of his employment?

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STATEMENT OF FACTS The majority opinion of the court of appeals correctly stated the nature of the case: Goodman and Heflin were both employees of Minyard, working in store number 83 in Highland Village. Heflin was the store's manager and Goodman was the POS, or point of sale, coordinator, responsible for ensuring that merchandise was properly and accurately priced in the store. On January 15, 1998, Goodman was in her office at the store when Sheila Hughes, a checker, approached her screaming, "You better pack your bags. I'm fixing to get you fired." Hughes pointed to Heflin and said to Goodman, "There's the man you've been having the affair with." Gary Flowers, the district manager for Minyard, arrived at the store shortly thereafter, having received a telephone message from Hughes saying that she wished to speak with him. Hughes told Flowers that Heflin had confided in her that he and Goodman had kissed and hugged on a few occasions. Hughes felt like Goodman had found out that Heflin told her this information, and that as a result, Goodman was "taking it out on" Hughes. Flowers also spoke with another employee that day, Alejandra Marks, who reported that Heflin had told her that he and Goodman kissed and hugged. Flowers then confronted Heflin, who admitting to kissing and hugging Goodman but denied having a "sexual relationship" with her. Heflin also admitted that he kissed Marks as well. Heflin gave a written statement to Flowers on January 15 outlining these admissions. Goodman told Flowers that she had allowed Heflin to rub her shoulders and that she had given him a "friendly hug," but she denied having ever kissed him. Marks, Heflin, and Goodman were immediately transferred to different Minyard stores.... Goodman decided that she could no longer work for Minyard and turned in her resignation. Goodman filed suit against Hughes, Marks, Heflin, and Minyard, seeking damages for slander. The case was submitted to a jury, which found that Goodman had been slandered by Heflin but not by Hughes or Marks. The jury further found that the slanderous statements of Heflin were made in the course and scope of his employment at Minyard. The jury assessed actual damages of $325,000. The trial court entered judgment on the verdict against Heflin and Minyard, jointly and severally. 50 S.W.3d at 135-36.

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SUMMARY OF THE ARGUMENT An employer is liable for the tort of its employee only when the tortious act falls within the scope of the employee's general authority and was committed in the furtherance of the employer's business and for the accomplishment of the object for which the employee was hired. Lyon v. Allsup's Convenience Stores, Inc., 997 S.W.2d 345, 347 (Tex. App.­Fort Worth 1999, no writ). The Goodman majority, while paying lip service to this wellestablished test for respondeat superior liability, vitiated it by holding Minyard liable for Heflin's defamation of Goodman solely on the basis it was in Heflin's "general authority" to answer questions posed by Minyard during its investigation of his misconduct. This Court should adopt Chief Justice Cayce's dissenting opinion, which applied correctly the legal standard for vicarious liability to the facts of the case: [T]here is no evidence that when Heflin lied about Goodman he did it to accomplish any objective for which he was employed. See Lyon v. Allsup's Convenience Stores, Inc., 997 S.W.2d 345, 347-48 (Tex. App.­Fort Worth 1999, no pet.) (holding that supervising employee's defamation of another employee not within course and scope of employment because it was "not done to accomplish any object for which [the employee] was hired"). In fact, all of the evidence before us proves Heflin's lies about Goodman were deviations from his duties as a Minyard's employee. 50 S.W.3d at 143 (Cayce, C.J., dissenting). The majority opinion places Texas employers in an untenable situation. Employers have a duty to investigate complaints of workplace misconduct, yet they have no ability to control the veracity of witnesses questioned during the investigation. An employer does not authorize a dishonest response by merely asking a question, and a lie to one's employer does not further the employer's business. An employee who is the target of an employer

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investigation and who out of self-interest deceives his employer cannot be acting in the course and scope of his employment. See ITT Consumer Fin. Corp. v. Tovar, 932 S.W.2d 147, 159 (Tex. App.­El Paso 1996, writ denied) (citation omitted). Thus, Texas courts recognize the critical distinction between defaming one to one's employer and defaming one for one's employer. Compare Lyon, 997 S.W.2d at 345 (employer not vicariously liable for unauthorized, self-serving false statements of store manager) with Hooper v. Pitney Bowes, Inc., 895 S.W.2d 773 (Tex. App.­Texarkana 1995, writ denied) (employer vicariously liable for defamatory statements made by its investigators during investigation of employee misconduct). Contrary to the assertion first raised by Goodman in her Response to Petition for Review, this Court has not applied a different and less-stringent standard for respondeat superior liability in a defamation case than it applies in every other tort case. Specifically, regardless of the nature of the tort, respondeat superior liability is not established without evidence that the employee acted within the scope of his general authority and committed the act in the furtherance of the employer's business and for the accomplishment of the object for which the employee was hired. See Lyon, 997 S.W.2d at 347-48; Heiser v. Eckerd Corp., 983 S.W.2d 313, 315-16 (Tex. App. ­ Ft. Worth 1998, no pet.); Hooper, 895 S.W.2d at 777. No valid social or public policy purpose is served in making it easier for plaintiffs to hold employers vicariously liable for defamation than for other torts. If Texas were to adopt the relaxed defamation respondeat superior standard proposed by Goodman, it would be the only state in the Union to have done so.

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ARGUMENT Issue: Is an employee who lies to his employer when he is being investigated for workplace misconduct acting within the course and scope of his employment? At trial, Goodman did not submit a question to the jury as to whether any principal of Minyard slandered her. Her cause of action against Minyard was indirect, relying upon the principles of vicarious liability. Thus, to obtain money damages from Minyard, Goodman first had to prove all the elements of the underlying slander claim against Heflin.2 Next, Texas law required her to prove Heflin was acting in the course and scope of his employment when he slandered Goodman. Appellant's evidence at trial was legally insufficient to establish respondeat superior liability. A. Standard of Review A no evidence point of error requires this Court to examine the legal sufficiency of the evidence to support the challenged point. In conducting its review, the Court should review only the evidence supporting the challenged finding and disregard the evidence favoring the complaining party, unless the evidence is uncontroverted. McKnight v. Hill & Hill Exterminators, 689 S.W.2d 206, 207 (Tex. 1985). Findings based on mere surmise or suspicion will not be upheld. Browning-Ferris, Inc. v. Reyna, 865 S.W.2d 925, 928 (Tex.

The only defamatory statements at issue in this appeal are those made by Heflin to Gary Flowers, Minyard's district manager. Goodman conceded in her appellate brief below that Heflin's comments to Marks and Hughes about Goodman were not made by Heflin in the course and scope of his employment. See Brief of Appellee Brenda K. Goodman at 30. Similarly, comments allegedly made by other Minyard employees to Goodman were not the basis of the jury's verdict or the court of appeals' decision.

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1993). When only a scintilla of evidence is offered to prove a vital fact or element of a claim, the finding must be reversed. McKnight, 689 S.W.2d at 207. B. No Evidence of Course and Scope As recited above, Flowers received a complaint from Hughes concerning the possibility of an inappropriate relationship between Heflin and Goodman. The allegation triggered a duty by Flowers to investigate the possible violation of Minyard's policies. Accordingly, as part of that investigation, Flowers questioned Heflin about the statements he already had made to Hughes and Marks. Heflin confirmed he had on a few occasions kissed, hugged and massaged Goodman. Goodman contends Heflin lied about the kissing and thereby defamed her to Flowers. An employer is liable for the tort of its employee only when the tortious act falls within the scope of the employee's general authority and was committed in the furtherance of the employer's business and for the accomplishment of the object for which the employee was hired. See Lyon, 997 S.W.2d at 347 (citations omitted); Heiser, 983 S.W.2d at 315-16 (citing Hooper, 895 S.W.2d at 777). The majority opinion, citing Hooper, embraced this standard of respondeat superior liability3 only to then forsake it in its application of the law to the facts of this case. Indeed, the majority opinion's only analysis of the evidence

supporting a finding of respondeat superior liability consists of three sentences:

50 S.W.3d at 139 ("The employer is liable for the act of his employee...so long as the act is done while the employee is acting within his general authority and for the benefit of the employer.") (emphasis added) (citing Hooper, 895 S.W.2d at 777).

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Here, it was within Heflin's general authority as manager of the store to answer questions posed by his supervisor concerning accusations that he was having an improper relationship with another employee. Indeed, it was his obligation to do so. Consequently, we conclude that there is some evidence from which a jury could reasonably find that Heflin was acting in the course and scope of his employment when he made the slanderous statements. 50 S.W. 3d at 139. A cursory review of the majority's opinion reveals its fundamental flaw; the majority failed to identify record evidence supporting each of the elements of the test for respondeat superior. The majority concluded only that by responding to questions regarding his misconduct Heflin acted in the scope of his "general authority." The respondeat superior inquiry, however, does not end with the question of authorization. The standard is presented in the conjunctive; Goodman had to prove Heflin acted in his general authority and in furtherance of Minyard's business and for the accomplishment of the object for which he was hired. By failing to address the second element of the inquiry, the majority acted contrary to its own precedent and created an unworkable rule of law for employers. In his dissent, Chief Justice Cayce exposed the obvious flaw in the majority's holding by engaging in the entire respondeat superior inquiry. "Contrary to the majority's rationale, however, while it may have been within the course and scope of Heflin's employment to cooperate with the investigation, there is no evidence that when Heflin lied about Goodman he did it to accomplish any objective for which he was employed." 50 S.W.3d at 143 (citing Lyon, 997 S.W.2d at 347-48). "In fact, all of the evidence before us proves Heflin's lies about Goodman were deviations from his duties as a Minyard's employee." Id.

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Chief Justice Cayce's reasoning is consistent with mandatory precedent.

An

employee who is the target of an employer investigation and who out of self-interest deceives his employer cannot be acting in the course and scope of his employment See Wal-Mart Stores, Inc. v. Lane, 31 S.W.3d 282, 290 (Tex. App. ­ Corpus Christi 2000, pet. denied) (employee's false accusations of sexual harassment made during employer investigation into her complaints "is not referable to any duty she had to the corporation," and therefore, employee's defamation was not committed in the course and scope of her employment); ITT Consumer Fin. Corp., 932 S.W.2d at 159 ("It is inconceivable that an employee could plan and execute a fraud upon his employer and be in the furtherance of his employment."); Saenz v. Fidelity Sec. Ins. Co. of Am., 786 S.W.2d 110, 111 (Tex. App.-- San Antonio 1990, no writ) (same). Under Texas law, a critical distinction exists between defaming someone to one's employer and defaming someone for one's employer. Compare Lyon, 997 S.W.2d at 345 (employer not vicariously liable for unauthorized, self-serving false statements of store manager) with Hooper, 895 S.W.2d at 777 (employer vicariously liable for defamatory statements made by its investigators during investigation of employee misconduct). The distinction is that in Lyon, the employee was serving his own interests while lying to his employer. In Hooper, on the other hand, the defamatory statements were made by the investigators themselves. Their defamatory statements were made within their general grant

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of authority, and the investigators at least believed they were acting in the employer's interest. Hooper, 895 S.W.2d at 777.4 In the instant case, this distinction makes all the difference for Minyard. It is clear that Heflin's lie about his relationship with Goodman was to Minyard, not in Minyard's behalf. Heflin was not conducting the investigation; he was the target of the investigation. If anything, during the investigation, Heflin and Minyard were in an adversarial position. Minyard never authorized Heflin's slander, nor was slander within the conduct Minyard expected from Heflin in the performance of his duties as a store manager. To the

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The court explained its decision as follows:

An action is sustainable against a corporation for defamation by its agent if the defamation is referable to the duty owed by the agent to the corporation and was made while in the discharge of that duty....The investigation that they officially initiated was thus within their authority and responsibility. The fact that an employee does an act that is unauthorized or that would not be approved by his employer does not mean that the employee was outside of the scope of his employment. The employer is liable for the act of his employee, even if the specific act is unauthorized or contrary to express orders, so long as the act is done while the employee is acting within his general authority and for the benefit of the employer. The statements made by [the investigators] were made in their effort to investigate her conduct as their subordinate. Evidence showing that they met secretly away from the company to plan their next move is not dispositive. All of their activities were the kind that a manager was expected to conduct and were within the scope of their employment. 895 S.W.2d at 776-77.

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contrary, Minyard expected Heflin to tell the truth. Similarly, Heflin's slander did nothing to further Minyard's business. The Fort Worth Court of appeals' decision in Lyon bears close scrutiny. There, the court considered whether the district court properly granted summary judgment to Allsup's in a case alleging one Allsup's employee defamed another in the course and scope of his employment. Lyon, 997 S.W.2d at 345-347. The defamer, Johnson, directly supervised Lyon while both were employed by Allsup's. Id. at 346. Johnson falsely accused Lyon of stealing company funds and terminated her employment. Id. Although Johnson was in fact the thief, he told his district manager he terminated Lyon because she had violated the company's cash handling policy. Id. He told another manager he was taking Lyon to the police department to file charges against her because a deposit was missing. Id. Lyon sued Allsup's, claiming it was liable for the false and malicious statements of Johnson and the actions of Johnson were ratified by Myers and Allsup's. The trial court granted Allsup's motion for summary judgment. Id. Citing the legal standards quoted above, the appellate court considered whether there was any evidence the alleged defamation was within the scope of Johnson's authority­ i.e., in furtherance of Allsup's business and for the accomplishment of the object for which Johnson was hired. According to the court: Although Johnson had authority to terminate store managers, the inference from summary judgment evidence indicates that Johnson fired, and allegedly defamed ... appellant in an effort to conceal unauthorized activities of his own. This obviously was not done to accomplish any object for which ... Johnson ... was hired. That Johnson had the authority to, and did, fire appellant, is

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factually independent from the actions which constituted the torts alleged by appellant. Id. (citations omitted). All the evidence indicated Johnson's actions were deviations from his duties. Accordingly, the court refused to impute liability to the employer for the unauthorized, self-serving defamatory remarks of its store manager. Id. In their essentials, the facts in Lyon are similar to the facts in the instant matter.5 Heflin, for personal ends not established in the record, falsely claimed to Minyard that he kissed Goodman. No record evidence allows an inference Minyard generally authorized the false statement or could in any way benefit from it. As the appellate court held in Lyon, Minyard cannot be vicariously liable for Heflin's unauthorized, self-serving, false statements.6 In apparent recognition of the shortcomings of the majority opinion, Goodman uses her Response to Petition for Review to recast the issue as whether an employee who "participates" in an employer's investigation is acting in the course and scope of his employment. According to Goodman, this issue is well-settled by Hooper; participants in

The glaring difference between the cases is the readily apparent motive of the store manager in Lyon to lie. Heflin's motive to lie is more difficult to grasp. If believed, Heflin's statements about Goodman would cost him dearly. Because a jury did not believe them, they have cost him even more. Nevertheless, the same legal principles apply regardless of the slander's effect on the slanderer.

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Incredibly, the majority opinion does not even cite or reference Lyon. "Adhering to precedent fosters efficiency, fairness, and legitimacy. More practically, it results in predictability in the law, which allows people to rationally order their conduct and affairs." Grapevine Excavation, Inc. v. Maryland Lloyds, 35 S.W.3d 1, 5 (Tex. 2000) (citations omitted). By not even citing the controlling precedent, the majority opinion decimates the fundamental principle of stare decisis.

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an employer investigation are discharging an employer-delegated duty and an employer's vicarious liability attaches to any defamatory statement made by a participant during the investigation if the participant makes the statement with knowledge or reckless disregard of its falsity (ie., with malice). Goodman's position is untenable because it disregards the status and role of the investigation "participant." In Hooper, the "participants" were the investigators whom the employer specifically charged with responsibility to interrogate witnesses. In contrast, Heflin "participated" in Minyard's investigation solely as the subject of the investigation. The only "duty" he had was to answer truthfully direct questions about his alleged misconduct. The witnesses and the targets of an investigation are not acting "referable to any duty" to the employer or "about the employer's business." See Wagner v. Caprock Beef Packers Co., 540 S.W.2d 303, 305 (Tex. 1976); Walmart Stores, Inc., 31 S.W.3d at 289. They were not hired to be fact witnesses or wrongdoers and certainly were not hired to defame their co-workers. See, e.g., Rausman v. Baugh, 248 A.D.2d 8, 9 (N.Y. App. Div. 1998) ("In contrast, (Defendant), as a social worker, was not hired for the purpose of making allegations of alleged sexual harassment, let alone defamatory ones, and it was not part of her job description) (citations omitted). Although privileged to truthfully reveal facts for which liability might otherwise attach, they are neither cloaked with the employer's authority, nor furthering the object for which they were hired. Wagner, 540 S.W.2d at 305; Walmart Stores, Inc., 31 S.W.3d at 289. This conclusion is particularly true of the target of the investigation who may often decide to lie out of self-interest.

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C.

The Majority Opinion Creates an Untenable Rule of Law for Texas Employers The law recognizes and facilitates society's interest in encouraging employer

investigations into workplace misconduct. For example, under prevailing sexual harassment law, employers are strictly liable for sexual harassment inflicted by a supervisor upon another if the victim experiences tangible job detriment. Burlington Indus., Inc. v. Ellerth, 524 U.S. 742, 765, 118 S. Ct. 2257, 2270 (1998). Employers are afforded an affirmative defense to liability, but lose the defense if they fail to investigate allegations of sexual harassment promptly. See Ellerth., 524 U.S. at 765, 118 S. Ct. at 2270; see also Bartkowiak v. Quantum Chem. Corp., 35 S.W.3d 103, 111 (Tex. App.­Amarillo 2000, no pet.) (summary judgment granted on affirmative defense because employer "exercised reasonable care to prevent, and to correct promptly, any sexually harassing behavior"). Similarly, Texas employers have "a conditional or qualified privilege that attaches to communications made in the course of an investigation following a report of employee wrongdoing." Randall's Food Markets, Inc. v. Johnson, 891 S.W.2d 640, 646 (Tex. 1995). Both principles serve to encourage an employer to investigate allegations of workplace misconduct.7 Nevertheless, the majority opinion eviscerates the protections of the investigative privilege established in Randall's and places every Texas employer in a no-win situation. Although an employer has both a duty and a privilege to undertake an investigation, the

The appellate court found that Heflin's statements to Flowers were not subject to the qualified privilege because the jury could have reasonably concluded Heflin "made the statements... with knowledge as to the falsity of the statements or with reckless disregard as to their truth." 50 S.W. 3d at 140.

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majority opinion holds the employer strictly liable for the dishonesty of any employee questioned, including the target of the investigation. Compare Wal-Mart Stores, Inc., 31 S.W.3d at 290 (defamatory statements made during the course of employer investigation are privileged and therefore "will not support an award for defamation, unless the statements were made with actual malice"). Obviously, no employer can control the truthfulness of witnesses. Under the majority opinion, if one employee accuses another of sexual harassment, and the accused tells an investigator sexual contact occurred but was entirely consensual, two things result from this common occurrence. First, the employer has complied with its legal and ethical obligations to investigate. Second, the employer's vicarious liability for defamation is established. One of the employees must be lying, and the one who is lying has falsely accused the other of either sexual misconduct or making a false report. Under Ellerth, the employer was required to investigate, and under Randall's Food Markets, Inc., the employer was privileged to investigate. Nevertheless, under the majority decision, the employer is liable for merely having heard a lie. The only way the employer can prevent the lie is to refuse to investigate, which in turn will subject the employer to sexual harassment liability.8 See, e.g., Madison v. IBP, Inc., 257 F.3d 780, 795 (8th Cir. 2001) (employer's failure to satisfy its "affirmative obligation" to investigate sexual harassment complaints caused it to lose Ellerth affirmative

Goodman opines, without plausible explanation, the majority opinion will encourage employer investigations, but she fails to explain how an employer exercising utmost care could prevent a witness from lying to it in an investigatory interview. Under Goodman's theory, the question authorizes the answer and the employer is responsible for whatever the answer may be.

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defense and was sufficient to support the submission of a punitive damages question to the jury); Smith v. First Union Nat'l Bank, 202 F.3d 234, 246 (4th Cir. 2000) (failure of employer to investigate and confront alleged harasser regarding allegations of sexual misconduct created a material fact dispute as to whether employer acted with reasonable care to correct promptly harassing behavior); Dinkins v. Charoen Pokphand USA, Inc., 133 F. Supp. 2d 1237, 1253 (M.D. Ala. 2001) (denying summary judgment for employer on Ellerth affirmative defense where employer failed to investigate harassment thereby turning "a blind eye to the evil in its midst."); Miller v. Woodharbor Molding & Millworks, Inc., 80 F. Supp. 2d 1026, 1032 (N.D. Iowa 2000) (employer's failure to investigate was "dispositive" as to its failure to establish the first prong of the Ellerth affirmative defense).9 In Rausman v. Baugh, 248 A.D.2d 8 (N.Y. App. Div. 1998), a New York appellate court addressed this legal quandary in which Minyard and every other Texas employer now finds itself as a result of the published Goodman majority opinion. Rausman was the assistant director of the department of social work for Maimonides Medical Center. Baugh was a social worker under Rausman's supervision. Baugh complained to her employer that Rausman had sexually harassed her and then retaliated against her when she rebuffed his advances, accusations Rausman denied. After a nine-day investigation, Maimonides terminated Rausman's employment. 248 A.D.2d at 9.

These cases illustrate that Minyard's concern regarding the effect of the majority opinion on an employer's obligations under sexual harassment law is not mere alarmism.

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Rausman filed suit against Baugh and the medical center alleging, among other things, Baugh had defamed him to the medical center. Rausman maintained Maimonides was vicariously liable for Baugh's actions under the doctrine of respondeat superior because Baugh reported him pursuant to the medical center's written harassment policy. Rausman argued that because Baugh was authorized to report harassment to Maimonides, she defamed him in the course and scope of her employment and in furtherance of the medical center's business interests. Id. Maimonides moved to dismiss Rausman's claim on the grounds that if Baugh defamed Rausman to it, there was no basis for respondeat superior liability. 248 A.D.2d at 9. The trial court denied the motion to dismiss and Maimonides appealed. In its appellate briefing, Maimonides ­ like Minyard here ­ urged the court to reject Rausman's theory for respondeat superior liability because it placed employers in an impossible position with respect to state tort law versus federal harassment law. Id. at 11-12. The New York Court of appeals agreed with Maimonides, concluding the medical center could not do anything to protect itself from liability if Rausman's theory of respondeat superior were law. What is novel, however, and in our view untenable, is the plaintiff's proposal that respondeat superior be applied to allegedly defamatory remarks made by an employee complaining of sexual harassment by another employee, in this case, her supervisor. Maimonides argues that respondeat superior liability has never been carried that far and, if it were, it would discourage employers from dealing with sexual harassment. Maimonides points out that an employer who acts with vigilance and

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promptness in dealing with sexual harassment may be spared from liability. Conversely, employers who have acquiesced in sexual harassment at the workplace have been open to liability based on, among other concepts, respondeat superior, particularly under federal law. Given this landscape Maimonides contends that the virtuous employer would be placed in a legal quandary: employers are open to liability ­ even though the theoretical premise for liability may vary ­ when they improperly tolerate sexual harassment at the workplace; on the other hand, employers who are purportedly vigilant and decisive would, if the plaintiff's position prevails, face liability under respondeat superior for defamation. Put differently, respondeat superior if you do; respondeat superior (or some other form of liability) if you don't. The bases for liability would be serving opposing objectives and may coexist only by sacrificing one goal or chilling the other. 248 A.D.2d at 11-12. The New York appellate court then noted the dangerous precedent it would set if it were to adopt the respondeat superior theory proposed by Rausman. Although New York courts, in sexual harassment cases, fully recognize the potential liability of an employer who condones a hostile work environment, we know of no decision in which the doctrine of respondeat superior has been invoked, under State or Federal law, so as to impose that theory of liability on an employer for an employee's allegedly false accusation of sexual harassment, and it does not apply in this case. 248 A.D.2d at 12. Unfortunately, as a result of the Goodman majority opinion, New York now can identify the only state in the Union that would hold an employer liable for the defamatory statement of an employee who falsely reports another employee's alleged sexual misconduct.

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The Court should eradicate the stigma on the law of this state created by the slim majority opinion. D. Texas Does Not Utilize a Different, Less-Stringent Standard for Respondeat Superior Liability in Defamation Cases In her Response to Petition for Review, Goodman does not bother to refute the position of Minyard and Chief Justice Cayce that the record is void of any evidence Heflin acted in the furtherance of Minyard's business or for the accomplishment of the object for which he was hired when he defamed Goodman. Instead, she maintains this void is not fatal to her claim because the test for respondeat superior in a defamation case is different than the test applicable in every other tort case; to wit: a defamation case does not require proof that the defamer acted in furtherance of the employer's business and for the accomplishment of the object for which the defamer was hired. 10 In support of her contention, Goodman relies upon a federal case, Rodriguez v. Sarabyn, 129 F.3d 760 (5th Cir. 1997), that purports to construe this Court's opinion in Texam Oil Corp. v. Poyner, 436 S.W.2d 129 (Tex. 1968). Contrary to Goodman's position, this Court has never announced a different test for respondeat superior liability in the defamation context. In Poyner, the Court was called upon to resolve a very specific conflict in the Texas courts of appeals regarding whether a corporation could be liable for defamatory statements it had neither expressly authorized nor ratified. 436 S.W.2d at 130. The singular holding of the Court was that neither express

According to Goodman, "[i]n the case of defamation, where the conduct is a verbal statement and not a physical act, this Court established different (sic) test." Response to Petition for Review at 6-7.

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authorization nor ratification was necessary to impute defamation liability to an employer. Id. Poyner did not purport to explain or define when defamation is referable to or made while in the duty owed by an employee. The Court certainly did not announce it was ushering in a different standard for respondeat superior in a defamation context than that applied in every other context. Indeed, if that was the Court's intent, the paradigm shift was lost on the lower courts and, likewise, was not referenced in this Court's subsequent holding in a defamation case. See Wagner v. Caprock Beef Packers, Co., 540 S.W.2d 303 (Tex. 1976). While lower courts have applied Poyner faithfully by not requiring express authorization or ratification to impute employer liability, they consistently have construed the "duty" element of Poyner to require evidence that the defamatory words were spoken in furtherance of the employer's business. See Lyon, 997 S.W.2d at 347-48; Heiser, 983 S.W.2d at 315-16; Hooper, 895 S.W.2d at 777. In Wagner v. Caprock Beef Packers Co., a defamation case, this Court quoted the language from Poyner regarding express authorization and ratification, but unlike Poyner, the Court was called upon to construe what it meant for an employee to be acting "referable to or in discharge of any duty." The Court construed the "duty" element as requiring the defamer to be "about his employer's business" or "engaged in the work committed to him" when he uttered the slanderous words. 540 S.W.2d at 305. Similarly, Texas courts of appeals have construed the "duty" element as requiring the defamer to be acting in furtherance of his employer's business rather than indulging in

18

personal business or affairs. In Hooper, the court acknowledged the Poyner standard, but explained that acting in the discharge of a duty requires an employee "to be acting within his general authority and for the benefit of the employer."11 895 S.W.2d at 776-77. In Heiser v. Eckerd Corp., the Fort Worth Court of Appeals ­ in a panel which included the same justices forming the Goodman majority ­ cited to Hooper and employed the identical duty standard. 983 S.W.2d at 315-16. Later, in Lyon, the Fort Worth Court of Appeals again applied the same duty standard, but added that an employee who lies to another to conceal his own misconduct does not accomplish any object for which he was hired. 997 S.W.2d at 348. Plainly, these appellate courts have considered the course and scope standard for

defamation and other tort cases as interchangeable. Likewise, in GTE Southwest, Inc. v. Bruce, 998 S.W.2d 605, 617-18 (Tex. 1999), this Court cited with approval the course and scope analysis in Hooper ­ a defamation case ­ in addressing vicarious liability in a case of intentional infliction of emotional distress. Goodman's reliance on Rodriguez is unavailing. Even under the Rodriguez standard, vicarious liability is not present unless the employee's conduct is referable to and in the discharge of a duty to the employer. 129 F.3d at 767. An employee whom an employer interviews regarding his own misconduct is not discharging a duty owed to his employer. See Wal Mart Stores, Inc., 31 S.W.3d at 289 (employee who during investigation interview

Incredibly, Goodman's Response urges the Court to follow Hooper and quotes the "benefit of the employer" language upon which Minyard relies in its Petition. Response to Petition for Review at 7. It is incongruous for Goodman to claim "[t]he decision of Pitney Bowes is very similar to the facts at hand," only to then reject the legal standard upon which the decision is based.

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falsely accuses co-worker of sexual harassment is not acting "referable to any duty she had to the corporation.") (citing Wagner and Poyner). Moreover, the same distinction previously urged by Minyard is present in Rodriguez in that the alleged defamers uttered their slanderous remarks while performing their assigned duties as spokesmen for their employer ­ a fact pattern analagous to Hooper. No valid social or public policy rationale exists for Texas to apply a standard for respondeat superior liability in a defamation case than in cases involving other torts. Goodman certainly does not identify why defamation, as opposed to battery or intentional infliction of emotional distress, merits a less rigorous standard. Frankly, the argument that it does strains logic, and adopting it would result in absurd verdicts. For example, assume Heflin slapped Goodman during the same meeting in which he defamed her. Neither act would have furthered any interest of Minyard. Yet, under Goodman's theory of respondeat superior Minyard would be liable for Heflin's defamation, but not his battery. No societal interest warrants such a result. Indeed, no other state in the Union has adopted a lessrigorous (or, for that matter, different) standard of respondeat superior liability for defamation cases than for other intentional torts.12 No rational basis exists for Texas to be the first. PRAYER

Attached hereto as "Appendix A" is a table of the laws of the other 49 states as they pertain to respondeat superior. As reflected by the table, Minyard could not identify a single state that (1) established a different or weaker standard of respondeat superior for defamation than for other intentional torts, or (2) eliminated from the respondeat superior standard the requirement that the employee acted, at least in part, for the benefit of the employer.

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For the reasons stated in Minyard's Petition for Review, Reply in Support of Petition For Review and this Brief on the Merits, Minyard requests that the majority opinion's finding of course and scope be reversed, and that Chief Justice Cayce's dissenting opinion be adopted. Accordingly, this Court should reverse the judgment against Minyard and render judgment that Goodman take nothing on her claims against Minyard.

Respectfully submitted, OGLETREE, DEAKINS, NASH, SMOAK & STEWART, P.C.

__________________________________________ Bryant S. McFall Texas Bar No. 00784556 Andrew T. Turner Texas Bar No. 24008968 Ron Chapman, Jr. Texas Bar No. 00793489 700 Preston Commons 8117 Preston Road Dallas, Texas 75225 (214) 987-3800 (214) 987-3927 (Fax) ATTORNEYS FOR PETITIONER MINYARD FOOD STORES, INC.

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CERTIFICATE OF SERVICE This is to certify that on this ______ day of December, 2001, a true and correct copy of the above and foregoing was forwarded via certified mail, return receipt requested, to the following counsel of record: William Paul Rossini, Esq. Vial, Hamilton, Koch & Knox 1717 Main Street Suite 4400 Dallas, TX 75201 Attorney for Brenda Goodman C. Timothy Reynolds, Esq. Law Offices of Joel J. Steed, P.C. 5910 N. Central Expressway Suite 650 Dallas, TX 75206 Attorney for Les Heflin W. Carl Jordan 1001 Fannin Street, 2700 First City Tower Houston, TX 77002 Christopher A. Knepp Anissa A. Allbritton 600 Congress Avenue, Suite 2700 Austin, TX 78701 __________________________________________

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APPENDIX Table of Respondeat Superior cases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A

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