McClure v. Lovelace

HOTTEN, J. Appellee, a union member, brought a defamation action against appellants, local union and its president, predicated on alleged disparaging statements made by the president. Following a jury trial in the Circuit Court for Baltimore City, a verdict was reached in favor of appellee and damages were awarded. Appellants noted a timely appeal and present six questions for our consideration: 1. Did the trial court err by holding as a matter of law that [appellee] was not required to exhaust all available internal union remedies before filing the Complaint? 2.

Could the jury permissibly find, on the trial' record, that [appellant] McClure acted with “actual malice”? 1 3. Did the .trial court err by instructing the jury to presume damages if it found that [appellant] McClure defamed [appellee] with actual malice? 4. Did the trial court err by permitting the jury to award damages based on allegedly defamatory publications which took place outside the statute of limitations? 5. Should a new trial be awarded based on ex parte communications between the trial judge’s law clerk and [appellee]’s counsel which took place during the trial but were not disclosed on the record until after the jury’s verdict? 6.

Did the trial court err by awarding [appellee] economic damages? For the reasons that follow, we shall affirm the judgment of the circuit court. ⁷²¹ FACTS AND PROCEDURAL HISTORY In June 2007, appellant, David McClure (“Mr. McClure”), was elected President of Local 1300, Amalgamated Transit Union (“Union”). Appellee, William Lovelace, Jr., was reelected to his third term as Financial Secretary in the same election. Initially, the work relationship between Mr. McClure and appellee was amicable.

However, in early 2008, Mr. McClure became suspicious of appellee’s financial practices. As a result, a series of disagreements ensued between the two regarding the management of the Union and its finances. Other Union executive board members were aware of the conflict, as several arguments between appellee and Mr. McClure occurred during monthly board meetings. On September 2, 2009, during an executive board meeting, at which the vice president of the International Union was present, a Union member attended the meeting to request assistance with a grievance.

While addressing the board, the member stated that in April 2009, Mr. McClure said to him that appellee “has been caught red handed misappropriating funds and stealing money to finance his family personal vacations.” Both parties ran for their respective positions on the 2010 executive board. By the time campaigning began for the election, Mr. McClure and appellee were “political enemies.” Mr. McClure was reelected as Union president, but appellee lost. On September 2, 2010, appellee filed a complaint in the Circuit Court for Baltimore City against appellants, Mr. McClure and the Union, alleging defamation. In his complaint, appellee pled that Mr. McClure made defamatory statements about him, alleging that appellee was stealing money from the Union.

Prior to trial, appellants filed a motion to dismiss, arguing that appellee did not exhaust the available internal Union remedies and that if he had, the alleged harm suffered may have been avoided. At a hearing on January 5, 2011, the trial court denied the motion. The court reasoned that because the internal Union procedures could not provide monetary dam ⁷²² ages as a remedy, they were inadequate; therefore, appellee was not required to exhaust them. Appellee filed an amended complaint on June 20, 2011, alleging that the defamatory statements occurred as far back as 2007, but that he first became aware of them in September 2009.

In his complaint, appellee contended that his election defeat was a direct result of Mr. McClure’s defamatory statements, resulting in injury to his reputation and financial losses. In their answers, both appellants pled the affirmative defenses of failure to exhaust internal Union remedies and statute of limitations. At the summary judgment stage, both parties moved for judgment. Appellee was granted partial summary judgment on the question of whether appellee stole from the Union.

In appellants’ motions for summary judgment, they argued first, that the “actual malice” standard should have applied at trial and second, that the court should have barred any preSeptember 2009 statements. The motions court denied the request to apply the actual malice standard, concluding that the trial judge should resolve the issue, but the request to bar the pre-September 2009 statements based on the statute of limitations, was granted. However, the court later granted appellee’s motion for reconsideration, reasoning that appellants bore the burden to establish that the statements were barred. At trial, the crux of appellee’s case was that he lost the election because of unfounded rumors initiated by Mr. McClure.

Appellee presented a number of witnesses who testified that Mr. McClure stated that appellee should not be reelected because he was stealing money from the Union. Appellants introduced evidence of instances when appellee incorrectly applied Union policy and improperly reimbursed executive board members for expenses. In one instance, appellee reimbursed executive board members for travel mileage to a Union convention, even though they were only passengers in a vehicle. Mr. McClure asserted that these practices led him to believe appellee was mismanaging funds.

Appellants also introduced evidence that Mr. McClure requested the Union’s financial books from appellee, but appel ⁷²³ lee refused to provide them. The external auditor hired to perform the audit, testified that he also attempted to obtain the financial documents from appellee, but that appellee refused. Additionally, after the auditor and Mr. McClure entered appellee’s office through the use of a locksmith, they observed shredded material on the ground and could not locate relevant records for the audit. At the close of appellee’s case, appellants moved for judgment on the grounds that appellee was aware of some of the alleged pre-September 2009 statements which should have been excluded on statute of limitations grounds.

Appellants also argued that in applying the actual malice standard, appellee had not established liability. The trial court denied the motion. At the conclusion of all the evidence, appellants unsuccessfully renewed their motions for judgment predicated on the same basis and on the ground that there was insufficient evidence of economic loss. The trial court instructed the jury that it had to find that Mr. McClure acted with actual malice to find him liable.

The court also instructed the jury that if it found actual malice, it may presume damages. Appellants objected to the presumed damages instruction and to the jury being permitted to award damages for economic loss. After the jury began its deliberations, the trial court’s law clerk approached appellee’s counsel regarding an employment application she intended to submit to his law firm. The law clerk inquired whether she should apply directly to the hiring partner or instead give her application to appellee’s counsel.

Appellee’s counsel responded that he would submit the application for her. The next day, the law clerk emailed the hiring partner stating “[i]n the last week or so, I have had the pleasure of watching [appellee’s counsel] try a defamation case before [the trial judge], for whom I serve as a judicial law clerk. [Counsel] have graciously agreed to hand-deliver to you my application materials.” Later that day, appellee’s counsel informed appellants’ counsel regarding the conversation with the law clerk and that he was submitting her ⁷²⁴ application to his law firm. Soon after, the jury returned with a verdict in favor of the appellee, awarding him $200,000 for injury to reputation, $60,000 for financial loss, and $75,000 for mental anguish. The jury then resumed deliberations on the issue of punitive damages.

During the deliberations, the law clerk entered the jury room on two occasions, once to deliver written punitive damages instructions and once to deliver a pot of coffee. The jury later announced its verdict of $90,000 in punitive damages. Both appellants filed post-verdict motions for judgment notwithstanding the verdict, motions for a new trial and motions to amend the judgment. The grounds for the motions included the propriety of the interaction between the law clerk and appellee’s counsel.

The trial court denied the motions, reasoning that its law clerk’s involvement in the case was “very limited.” Appellants noted a timely appeal. Appellee filed a motion to dismiss the Union’s appeal for lack of standing. On October 2, 2012, this Court denied the motion. Additional facts shall be provided, infra, to the extent they prove relevant in addressing the issues presented.

STANDARD OF REVIEW Under Md. Rule 2—322(b)(2), a defendant may seek dismissal of a complaint if the complaint fails “to state a claim upon which relief may be granted.” “The appropriate standard of review of the grant or denial of a motion to dismiss is whether the well-pleaded allegations of fact contained in the complaint, taken as true, reveal any set of facts that would support the claim made.” Rivera v. Prince George’s County Health Dept., 102 Md.App. 456 , 649 A.2d 1212 (1994) (citing Flaherty v. Weinberg, 303 Md. 116,135-36 , 492 A.2d 618 (1985)). “We review a trial judge’s decision whether to give a jury instruction under the abuse of discretion standard.” See Thompson v. State, 393 Md. 291, 311 , 901 A.2d 208 (2006). “[T]o merit an instruction, the issue as to which the request is ⁷²⁵ made must have been generated by the evidence adduced.” State v. Martin, 329 Md. 351, 357 , 619 A.2d 992 (1993). A grant or denial of a motion for judgment or a motion for judgment notwithstanding the verdict is reviewed under the same standard. Orwick v. Moldawer, 150 Md.App. 528, 531 , 822 A.2d 506 (2003) (citations omitted). We assume the truth of all credible evidence on the issue, and all fairly deducible inferences therefrom, in the light most favorable to the party against whom the motion is made.

Id. Consequently, if there is any evidence, no matter how slight, that is legally sufficient to generate a jury question, the case must be submitted to the jury for its consideration. Id. at 531-32 , 822 A.2d 506 . DISCUSSION A. Was Appellee Required to Exhaust All Available Internal Union Remedies?

Appellants assert that the trial court erred by failing to dismiss appellee’s complaint, because appellee declined to pursue the internal Union procedures available, opting instead to file a complaint in court. Appellee responds that he was not required to pursue the internal procedures because they were procedurally and substantively inadequate. 2 The Court of Appeals has recognized that generally, a union member must exhaust all available remedies before seeking relief from the judicial system. Walsh v. Communications Workers of America, 259 Md. 608 , 271 A.2d 148 (1970). In Walsh , the defendant violated his union’s constitution by working and earning money during a strike.

Id. at 609 , 271 A.2d 148 . The union then initiated disciplinary proceedings against him. Id. The defendant did not respond to the disciplinary ⁷²⁶ proceeding notification, attend the hearing, produce any witnesses or speak on his own behalf.

Id. at 610 , 271 A.2d 148 . The hearing was held in his absence and a fíne was imposed. Id. The defendant neither paid the fine, nor appealed the decision as was his right under the union constitution.

Id. The union subsequently filed a lawsuit in court to enforce the fíne and received a judgment in its favor. Id. The defendant appealed, arguing that it was an unfair labor practice to impose a fíne on a union member and that federal labor laws prevented the union from seeking enforcement in a state court.

Id. The Court of Appeals noted that Maryland law requires that a member of an organization, including labor unions, exhaust available internal remedies before seeking relief from state courts. Id. at 612 , 271 A.2d 148 . The Court also considered that the defendant provided no evidence suggesting that the union appeal procedure was inadequate to protect his rights.

Id. at 613 , 271 A.2d 148 . The Court affirmed the trial court’s judgment. Although Maryland requires exhaustion of internal union procedures before seeking judicial relief, this doctrine is not absolute. The United States (“U.S.”) Supreme Court outlined the principles governing when exhaustion may be excused in Clayton v. International Union, 451 U.S. 679 , 101 S.Ct. 2088 , 68 L.Ed.2d 538 (1981).

In Clayton , the plaintiff, a union member, was terminated for misbehavior from his position at a plant. Id. at 682 , 101 S.Ct. 2088 . He requested that his union file a grievance on his behalf challenging the termination. Id.

The union initially pursued the grievance, but later withdrew from the process. Id. Instead of appealing the decision within the union, the plaintiff filed a lawsuit in federal district court alleging breach of the duty of fair representation. Id. at 683 , 101 S.Ct. 2088 .

The plaintiff sought reinstatement from his employer and monetary damages from both the employer and the union. Id. The defendant moved to dismiss the complaint for failure to exhaust internal union appeals procedures. Id.

The trial court dismissed the plaintiffs claim. Id. at 684 , 101 S.Ct. 2088 . ⁷²⁷ The plaintiff appealed to the U.S. Court of Appeals for the Ninth Circuit, which affirmed after deciding the union appeals process was adequate. Id. The Ninth Circuit ruled that because the plaintiff could have received money damages from the union, his failure to exhaust barred his lawsuit against the union.

Id. However, it did not bar the plaintiffs suit against the employer because the union appeals would not have resulted in his reinstatement. Id. The plaintiff requested certiorari and the U.S. Supreme Court granted it.

Id. at 685 , 101 S.Ct. 2088 . The Supreme Court held that exhaustion of remedies was not required because the union’s procedures could not have provided the complete relief sought. Id. at 691 , 101 S.Ct. 2088 . The Court was opposed to establishing a “universal exhaustion requirement lest employees with meritorious[ ] claims be forced to exhaust themselves and their resources by submitting their claims to potentially lengthy internal union procedures that may not be adequate to redress their underlying grievances.” Id. at 689 , 101 S.Ct. 2088 .

There are three factors that trial courts should consider when determining whether a party must exhaust: [F]irst, whether union officials are so hostile to the employee that he could not hope to obtain a fair hearing on his claim; second, whether the internal union appeals procedures would be inadequate either to reactivate the employee’s grievance or to award him the full relief he seeks [ ]; and third, whether exhaustion of the internal procedures would unreasonably delay the employee’s opportunity to obtain a judicial hearing on the merits of his claim. If any of the factors are found to exist, the court may properly excuse the employee’s failure to exhaust. Id. (emphasis added).

Under the second factor, the internal union appeal was inadequate, as it would not have resulted in his reinstatement or in the complete monetary relief which the plaintiff sought. Id. at 690 , 101 S.Ct. 2088 . “[ ] [Wjhere an aggrieved employee cannot obtain either the substantive relief he seeks or reactivation of his grievance, ⁷²⁸ national labor policy would not be served by requiring exhaustion of internal remedies. In such cases, exhaustion would be a useless gesture: it would delay judicial consideration of the employee’s [ ] action, but would not eliminate it.” Id. at 693 , 101 S.Ct. 2088 . It is the second Clayton factor which is relevant to the case at bar.

There are .no Maryland cases which address the adequacy of an internal union procedure that does not afford monetary damages. While this issue is one of first impression in Maryland, several jurisdictions have decided similar issues. Federal courts applying Maryland law have considered cases when a union member files suit without exhausting internal union procedures. See Prevas v. Hopkins, 905 F.Supp. 271 (D.Md.1995); Wiglesworth v. Teamsters Local Union No. 592, 552 F.2d 1027 (4th Cir.1976).

However, none have considered the relationship between adequacy of remedies and the absence of the option of monetary damages as a remedy. In Prevas , the plaintiff sued both his union and an investigation service, alleging they were negligent and had conspired to invade his privacy. 905 F.Supp. at 273 . The union-defendant filed a motion to dismiss for failure to exhaust internal union remedies. Id. at 274 .

The plaintiff argued that exhaustion would have been futile because he would not receive a fair hearing and the union procedures could not afford him a satisfactory remedy. 3 Id. at 276 . The court granted the defendant’s motion and dismissed the plaintiffs “speculative and unsupported” assertions. Id. At oral argument, appellants contended that the case law does not indicate “that failure to get money makes a remedy inadequate.” To the contrary, several jurisdictions have held that under Clayton , if a plaintiff seeks monetary damages, a union’s remedies are considered adequate if they allow for monetary damages. ⁷²⁹ In Murad v. Wayne State Regents, 239 Mid.App. 538, 609 N.W.2d 588 (2000), the Michigan Court of Appeals reversed a trial court’s ruling and held that a union member was required to exhaust internal union remedies before pursuing a case in state court.

The plaintiff made a number of charges all concerning his termination. Id. at 539, 609 N.W.2d 588 . The trial court excused the plaintiffs failure to exhaust internal union appeals because the union remedies would not reinstate the plaintiff and may not have provided monetary damages. Id. at 540, 609 N.W.2d 588 .

The defendants appealed. Id. The Michigan Court of Appeals found that the trial court erred because under Clayton , the remedies were adequate since the union’s constitution allowed for an award of monetary damages if an employee is reinstated. Id. at 545-46, 609 N.W.2d 588 .

As a result, it concluded that the union provided adequate relief, therefore, the plaintiff was required to exhaust. Id. Likewise, in Bredesen v. Detroit Federation of Musicians, 165 F.Supp.2d 647 (2001), the federal District Court of Michigan found that because a union member could recover monetary damages from the union, the internal procedures were adequate and she was required to exhaust them. Upon learning that her male counterparts were being paid at double her rate, the plaintiff sought assistance from her union to increase her pay.

Id. at 650 . After the union refused, the plaintiff initiated a lawsuit alleging breach of the duty of fair representation and sex discrimination. Id. at 651 . The defendant moved for summary judgment, arguing that the plaintiff’s claim should be dismissed for failure to exhaust internal union remedies.

Id. at 652 . Upon review of the union’s remedies, it was evident that the union could award money damages for lost compensation plus interest. Id. at 662 . Accordingly, the court reasoned that the second factor of the Clayton test was not satisfied and the plaintiff was required to exhaust.

Id. Several federal circuit courts have likewise found that an internal union remedy is inadequate when a plaintiff seeks monetary damages that cannot be awarded by the union. See Maddalone v. Local 17, United Brotherhood of Carpenters, ⁷³⁰ 152 F.3d 178 (2nd Cir.1998) (finding exhaustion not required when union failed to provide evidence to establish that it could award monetary damages as sought by a plaintiff); see also Beyene v. Coleman Security Services, 854 F.2d 1179 (9th Cir.1988) (refusing to require exhaustion when the plaintiff sought money damages but the union constitution did not allow for a monetary award). But cf. Tinsley v. United Parcel Service Inc., 665 F.2d 778 (7th Cir.1981) (ruling that a union member who sought monetary remedies in federal district court must first exhaust union remedies when the union can award monetary damages); Rogers v. Board of Educ. of Buena Vista Schools, 2 F.3d 163 (6th Cir.1993) (holding that when a plaintiff sues for both reinstatement and money damages, if union procedures can award money damages, the remedy is adequate and thus requires exhaustion).

Most recently in Chapman v. United Auto Workers Local 1005, 670 F.3d 677 (6th Cir.2012), the plaintiff alleged that his union failed to pursue a grievance on his behalf after he was terminated by his employer. After speaking with a union committee member regarding filing a grievance, the plaintiff was orally assured the committee member would pursue the matter. Id. at 678 . The plaintiff later learned that a grievance was never initiated and brought suit in federal district court.

Id. The district court granted the union’s motion for summary judgment and dismissed the case for failure to exhaust the remedies available to him under the union constitution. Id. at 680 . On appeal, the Sixth Circuit applied Clayton and concluded that the plaintiff provided no evidence to establish that the hostility or judicial delay exceptions applied.

Id. at 685 . It did conclude however, that the union offered evidence concerning the adequacy of its remedies. Id. The union’s constitution authorized it to award monetary damages, back pay or both as a result of a successful grievance.

Id. Therefore, the plaintiff could have received an adequate remedy from the union and was required to exhaust the union appeal process before seeking judicial relief. Id. ⁷³¹ Appellants rely on McPhetridge v. IBEW, Local Union No. 53, 578 F.3d 886 (8th Cir.2009) to support their contention that exhaustion is required because appellee could have avoided the damages he sought at trial by utilizing union procedures. In McPhetridge , the union notified the plaintiffs that they were in violation of a rule prohibiting employment at non-union approved businesses and that there would be a hearing where each could present a defense to the allegations.

Id. at 888 . The plaintiffs did not attend the hearing; therefore the union upheld the charges and fined each $5,000. Id. The union informed the plaintiffs of their right to appeal, but the plaintiffs did not.

Id. Instead, they filed suit in federal district court alleging that the union denied them due process and violated their free speech rights. Id. at 889 . The district court dismissed the claims on motion for summary judgment because the plaintiffs failed to pursue internal union remedies.

Id. On appeal, the plaintiffs asserted that their failure to exhaust was excusable because the union procedures could not award them the compensatory and punitive damages that they sought. Id. at 890 . The Eighth Circuit disagreed, deducing that if they had attended the initial hearing or appealed the result, the union could have dismissed the charges and the fine, thereby eliminating the need to resign and lose wages (for which they sought compensatory damages).

Id. at 891 . Accordingly, the plaintiffs’ exhaustion was not excused and the dismissal was upheld. Id. at 892 . Appellants also cite Fuller v. Local Union No. 106 of United Brotherhood, 567 N.W.2d 419 (1997).

In Fuller , the plaintiff brought suit against his union, his opponent in a union board election and two other union members. Id. at 421 . He alleged that after a union social event where he consumed beer, the two union members falsely reported to the opponent that the plaintiff was weaving while driving home. Id.

The opponent then called the city police, claiming that the plaintiff was driving under the influence. Id. The police detained the plaintiff during a traffic stop, but released him once they determined he was not intoxicated. Id.

The plaintiff brought ⁷³² union charges against the opponent for slander but the union board dismissed the charges. Id. Thereafter, the plaintiff sued asserting two counts. Id.

First, against the opponent and the union, he alleged malicious prosecution, abuse of process and intentional infliction of emotional distress. Id. Second, against the union, he alleged breach of contract, claiming that after he brought union charges for slander, the union ceased making work referrals on his behalf in violation of his union contract. Id.

The trial court granted the defendant’s motion for summary judgment on both counts, reasoning specifically regarding the breach of contract claim that the plaintiff did not exhaust the internal union remedies. Id. The plaintiff appealed, arguing that the trial court erred in dismissing his breach of contract claim because the union’s constitution did not provide him a meaningful remedy, since it could not grant monetary damages. Id. at 423 .

The Iowa Supreme Court recited Iowa law which excuses exhaustion when property rights are involved and union remedies would be futile, illusory, or vain. Id. The court held that the exceptions to exhaustion did not apply to the plaintiffs case because it was not a disagreement over collective bargaining and because there was an explicit clause in the union constitution requiring exhaustion. Id.

It concluded that an appeal through the national union procedures may have resolved the plaintiffs claims of bias at the local level. Id. at 424 . In the instant case, it is undisputed that there were at least two Union disciplinary procedures available to appellee: a challenge and a chargeable offense. Appellants aver that if appellee believed that the election results were attributable to misconduct, he could have filed a challenge.

Challenges. Any member who is entitled to vote may challenge the conduct or results of an election by filing, within ten (10) days of the counting of the ballots, a challenge to the incumbent Secretary] Treasurer] of his or her L[ocal] U[nion] to such effect. The Secretary] Treasurer] shall submit the challenge for decision to the executive board, subject to final ruling by the membership. ⁷³³ Amalgamated Transit Union Constitution and General Laws § 14.8. Additionally, appellants assert that appellee could have brought charges against Mr. McClure for defamation.

At least one individual testified at trial that making false statements about another executive board member was conduct that could result in charges being pursued. 4 Chargeable Offenses. Any officer or member may be charged with specific activities involving: a violation of any specific provision of the Constitution and General Laws or the bylaws of the member’s L[ocal] U[nion]; gross disloyalty or conduct unbecoming of a member; malfeasance or non feasance in office; financial malpractice; corrupt or unethical practices or racketeering; dual unionism, decertification or secession; or a violation of duly established and applicable rules, regulations, policies or practices of a [Local Union] ... Amalgamated Transit Union Constitution and General Laws § 22.1. In response, appellee points to the inadequacy of these procedures as excusing any required exhaustion.

Following the hearing on appellants’ motion to dismiss, the trial court denied the motion because appellee was seeking monetary damages and the Union constitution did not provide for a monetary damage award. The trial court determined that even if appellee was instructed to pursue the Union ⁷³⁴ appeal process, he would later return to court seeking monetary damages. Appellants never contested appellee’s contention that the Union was unable to provide monetary damages. The Union’s constitution provides that: The [General Executive BoardJ’s power to deal with members found guilty of violations of this section shall include the power to suspend, expel, fine, declare ineligible for holding office or otherwise discipline such members.

Amalgamated Transit Union Constitution and General Laws § 12.5. As the trial court correctly indicated, none of the Union remedies would allow appellee to recover money for any harm established. The remedies could have resulted in the assessment of a fine or the suspension of Mr. McClure, but neither were sought by appellee. As the federal circuit courts have concluded on many occasions, pursuant to Clayton , a union remedy may be inadequate if a plaintiff seeks monetary damages and the union cannot provide them.

Before the trial court and here on appeal, appellants rely on Prevas and Fuller ; however, these cases are distinguishable. The thrust of the argument in Prevas was that exhaustion was futile because the plaintiff would not receive a fair hearing. Importantly, there was no indication that the plaintiff sought monetary damages or that the union could not provide them. In contrast, in the instant case, the main contention is that appellee sought monetary damages, but the Union constitution did not provide that as a possible remedy.

Likewise, in Fuller , while the court did conclude that the plaintiff had to exhaust the internal union remedies before bringing his breach of contract suit, its reasoning did not address the adequacy of the remedies. The court predicated its holding on two reasons: the fact that the dispute was not a collective bargaining dispute and that the union constitution expressly required exhaustion. 5 What was not included in ⁷³⁵ the court’s reasoning was any discussion regarding whether the remedies available were monetary or adequate. For the above reasons, Fuller and Brevas provide little guidance in answering the question before us. McPhetridge is also distinguishable.

In that case, the Eighth Circuit found that the plaintiffs did have to exhaust because availing themselves of the union remedies could have resulted in