Do False Statements About A Former Employee During A Bank’s Board Of Directors Meeting Constitute Defamation? No, Says A Florida Appellate Court.

One of the requirements of a claim for defamation is “publication” of the false statement to a third party.  In practice, this generally means that a communication between two employees of a corporation cannot constitute defamation because such a communication is tantamount to a “corporation talking to itself.”  For example, if one employee writes an email to another employee of the same corporation, and thereby makes false allegations against some other person outside of the company, that is usually not “publication” for purposes of a defamation claim.

But what if the false statements are made during a meeting of the Board of Directors of a banking corporation and the Board includes several “outside directors” who are not otherwise employed by the bank?  Are those outside directors sufficiently connected to the bank to constitute the “corporation talking to itself”?  Yes, says Florida’s Third District Court of Appeal in rejecting a claim for defamation.  See Hullick v. Gibraltar Private Bank & Trust Company, Case No. 3D18-0203, 2019 WL 4456072, 44 Fla. L. Weekly D2345a (Fla. 3d DCA Sept. 18, 2019).

The Appellate Court summarized the facts of the case:

In May 2007, Hayworth, former CEO, Executive President, and Chairman of Gibraltar’s Board of Directors, hired Hullick to fill the recently-vacated Chief Operating Officer (“COO”) position. Hullick’s time with Gibraltar was, however, short-lived. In July 2007, Hullick wrote a memo in which he expressed concern over irregularities and other suspicious activity in a client’s accounts. Over the next 15 months, Hullick reported his ongoing concerns to Hayworth, the Board of Directors, the Senior Managing Director, the Audit Committee, the Chief Risk Officer, the Bank Secrecy Act/Anti-Money Laundering Officer, and the Chief Credit Officer. In addition, Hullick reported his concerns regarding Senior Vice President John Harris, the Regional Market Manager at Gibraltar’s Ft. Lauderdale branch, where the client’s accounts were maintained. Hullick believed that Harris was aware of fraudulent activity in the accounts and was permitting it to continue. Conflict arose between Harris and Hullick, and Hullick was eventually terminated from his position as Gibraltar’s COO.

Approximately two years later, Hullick filed the underlying action, alleging, inter alia, that Hayworth made multiple defamatory statements about him post-termination that destroyed his reputation in the banking community, making it difficult for him to find employment. Hullick further alleged Hayworth made these statements to the other members of Gibraltar’s Board of Directors during a Board meeting.

Id. at *1.

After the Trial Court granted summary judgment in favor of the bank on the defamation claim, the Appellate Court defined the specific issue being considered and explained why it was affirming the Trial Court’s conclusion that no “publication” occurred under the facts of the case:

The issue before us is whether publication to a third party occurred when Hayworth allegedly made defamatory statements as the CEO and Chairman of Gibraltar’s Board of Directors to other members of the Board. It is undisputed that an essential element of a defamation claim is publication to a third party.

In Geddes, this Court explained that, with respect to corporations, “statements made to corporate executive or managerial employees of that entity are, in effect, being made to the corporation itself, and thus lack the essential element of publication.” 960 So. 2d at 833; see also Lopez v. Ingram Micro, Inc., 10 Fla. L. Weekly D635, 1997 WL 401585 (S.D. Fla. Mar. 18, 1997) (“[S]tatements ‘made to a corporate executive or managerial employee … are, in effect, being made … to the corporation itself ….’ ” (quoting Hicks & Grayson, Inc., 447 So. 2d at 331)).

Gibraltar is a Federal Savings Association (“FSA”). As such, federal regulations require that “[a] majority of the directors must not be salaried officers or employees of the savings association or of any subsidiary thereof.” 12 C.F.R. § 163.33(a)(1)(i). Hullick argues that because Gibraltar’s Board of Directors is comprised of a majority of non-employee directors, Geddes does not apply. We disagree.

In Hoch v. Loren, 273 So. 3d 56, 57 (Fla. 4th DCA 2019), the Fourth District explained the rationale behind treating certain intra-corporate communications, even though apparently made to third persons, as not published for the purposes of a defamation claim: “To reach this conclusion, courts have employed the legal fiction that the party hearing or seeing the purported defamation is so closely connected with the potential defamation plaintiff or defendant that they merge into a single entity, so there is no publication to a ‘third person’ necessary to the cause of action.”

Here, although Gibraltar’s Board includes a majority of non-employee directors, these directors and Hayworth, the former CEO, were undoubtedly so closely connected with Gibraltar that communications among the Board and Hayworth were tantamount to the “corporation talking to itself.” See Geddes, 960 So. 2d at 834. This conclusion is supported by the federal regulations governing FSAs, which require non-employee directors to form an integral part of the FSA corporate structure. See 12 C.F.R. § 163.33(a)(1)(i).

Further, Florida law has long considered a board of directors to be a corporation’s management and has provided that the acts of a corporation’s board of directors are the acts of the corporation itself.

We therefore conclude that the rationale underlying the rule set forth in Geddes is equally applicable here. Consequently, because federal regulations require a majority of Gibraltar’s Board to be composed of non-employees, communications between Hayworth and Gibraltar’s non-employee directors [are] subject to the same no-publication rule set forth in Geddes.

Because Hayworth’s alleged defamatory statements made to Gibraltar’s Board of Directors do not constitute publication to a third party, the trial court was correct in granting summary judgment as to Hullick’s claims against Hayworth for defamation.

Id. at *2-3.

Thus, if someone makes a knowingly false statement about another person during a meeting of a company’s Board of Directors, it will be important to evaluate the attendees at the meeting and the regulatory laws applicable to those attendees as part of determining whether a viable claim exists for defamation.

Copyright 2019

Matthew J. Meyer, Esq.

Ansa Assuncao LLP