Burton v. Fountainhead Development, Inc.

         Appeal from the Superior Court of the State of Alaska, Fourth Judicial District, Fairbanks, No. 4FA-12-01642 CI Jane F. Kauvar, Judge.

          James M. Hackett, Law Office of James M. Hackett, Fairbanks, for Appellant.

          David H. Bundy, David H. Bundy, P.C., Anchorage, for Appellee.

          Before: Stowers, Chief Justice, Winfree, Maassen, Bolger, and Carney, Justices.

          OPINION

          MAASSEN, Justice.

         I. INTRODUCTION

         A tour company hired an employee to work the tourist season as one of its representatives at a Fairbanks hotel where he had worked seasonally in the past. During training, hotel management recalled that the employee had been difficult to work with. They told the tour company they did not want him working at their hotel and, in explaining their decision, made several unfounded statements about him. When the tour company was unable to place the employee at a different hotel because of his limited transportation, it terminated his employment.

         The employee sued the hotel for defamation and for tortious interference with his prospective business relationship with his employer. Following a bench trial the superior court rejected the tortious interference claim based on lack of causation but found that several of the hotel's statements were defamatory per se, justifying an award of general damages but not special or punitive damages. The court also denied the employee's motion to amend his complaint to add a new defamation claim based on events that arose mid-trial. The employee appeals.

         We conclude that: (1) the superior court did not abuse its discretion in denying the employee's post-trial motion to amend his complaint; (2) the court did not clearly err in its application of a conditional business privilege or in its finding that the defamation did not cause the employee's damages; and (3) the court did not clearly err in its award of damages. We therefore affirm the judgment of the superior court.

         II. FACTS AND PROCEEDINGS

         A. Facts

         Princess Tours hired Ronald Burton to work the 2011 tourist season as a "guest service host." Guest service hosts are stationed at hotels where Princess houses its tour groups; they help hotel employees greet and serve the large numbers of Princess guests as they arrive and require various services. Burton was hired to work primarily at Bear Lodge, owned by Fountainhead Development, Inc., because it was within walking distance of his home and he lacked alternative transportation; however, he also agreed to work as needed at other Princess-affiliated hotels in Fairbanks. Burton had worked seasonally for Princess Tours before, from 1999 to 2004, and at Bear Lodge from 2000 to 2003.

         Burton completed several weeks of training in the spring of 2011, including a visit to Bear Lodge. There, in the presence of his Princess supervisor, Jonathan Bradish, and a Fountainhead manager, Stuart Campbell, Burton criticized the traffic flow in the hotel's parking lot. Campbell relayed the criticism to Fountainhead's general manager, Shane Arnold, who passed it on to the personnel and operations manager, Kathleen Lanning. The criticism reminded the management team of other complaints Burton had made while working on Fountainhead's property years before. Lanning and Timothy Cerny, Fountainhead's president, decided they did not want Burton as a guest service host at Bear Lodge, and they asked Arnold to speak to Princess about their decision.

         Arnold told Bradish of Fountainhead's decision on May 13. The two men later recalled the conversation differently, but the superior court found that Arnold told Bradish that Burton was "not allowed" on Fountainhead's property. When Bradish asked why, Arnold said that Burton had once been involved in an altercation with a guest and that he had "defaced" Fountainhead property.^[1]

         Burton was scheduled to begin work at a different hotel on May 16. Bradish pulled Burton from the schedule and told him about Fountainhead's allegations. Burton denied them, and Bradish granted him a "grace period" to sort things out with Fountainhead. Over the next several days Burton exchanged emails and phone calls with Lanning, and on May 24 she sent him a letter "to recap [a] phone conversation of last week." According to the letter, Burton was not "banned" from Fountainhead's property; he was welcome there "anytime as a guest, " but he would not be welcome as an employee. Fountainhead's decision was based on its impression that Burton was "never happy with [the hotel's] policies and procedures" when working there in the past. Lanning also mentioned a different incident when Burton "had not been supportive of a management decision while in the presence of guests, " though she had heard the story second-hand and lacked any other details. Lanning's letter concluded that employing Burton at Bear Lodge would not be "in the best interest of [Fountainhead] or that of Princess's guests."

         On May 28 Burton emailed Bradish, reminding him that he could not easily "work at any other location than Bear Lodge except on rare occasions" because of his transportation issues. Anticipating that this meant the end of his Princess employment, he asked "that any action for [his] separation from employment be in writing and address the cause." Bradish emailed back, confirming that Princess had hired Burton "hoping to place [him] at Bear Lodge" and that it could "no longer have [him] on [its] team [due] to schedule parameters." Princess documented Burton's termination internally with a note that said he "[w]as banned from Fountainhead Properties by their management, which meant he couldn't work where we wanted him to." Princess also marked Burton as ineligible for rehire.

         B. Proceedings

         In May 2012 Burton filed a complaint against Fountainhead alleging two causes of action: (1) tortious interference with a prospective business relationship, for causing Princess to terminate his employment; and (2) defamation based on Arnold's statements to Bradish about "Burton's past performance as a [Fountainhead] employee." Fountainhead raised defenses of truth and privilege, among others. The superior court held a bench trial over three days in December 2014, then scheduled closing arguments for February 2015.

         Before closing arguments, Burton moved pursuant to Alaska Civil Rule 15(b) to amend his complaint to add an additional defamation claim based on conduct that "occurred... during the course of the court trial." The court had suggested mid-trial that Fountainhead talk to Princess and attempt to correct any misimpression Princess might have about why Burton was barred from working at Bear Lodge. That evening Fountainhead wrote a letter to Princess asking the company to correct the "termination paperwork" in Burton's personnel file to reflect that he "was never 'banned' from [Fountainhead's] properties." To help explain why it had not wanted Burton to work at Bear Lodge, it attached a copy of Lanning's 2011 letter to Burton. Burton's amended complaint alleged that this mid-trial correspondence was a separate publication and libel that caused him additional harm and entitled him to additional damages. Fountainhead did not oppose Burton's motion to amend, and it filed an answer to the amended complaint.

         In February 2015, while hearing the parties' closing arguments, the superior court noted that Burton's motion to amend was not yet ripe for decision. But the court said it would take Fountainhead's mid-trial letter into consideration in crafting any damages award.

         A few weeks later the court issued its written decision on the merits. It found against Burton on his claim for tortious interference with a prospective business relationship on the ground that his employment ended because of his "refusal to work at Princess locations besides Bear Lodge, " not because of what Fountainhead said about him to Princess. The court concluded that Fountainhead had a "conditional privilege to publish defamatory statements" because of its shared business relationship with Princess, but that it abused this privilege with two statements to Princess that were defamatory per se: "that [Burton] had an altercation with a guest, and that [Burton] defaced [Fountainhead's] property." The court awarded Burton $15, 000 in general damages on the defamation claim but denied special and punitive damages. In a separate written order the court denied Burton's motion to amend his complaint, though it reiterated in its decision that it had taken Fountainhead's mid-trial letter into account "in fashioning [Burton's] award in this case."

         Burton requested a new trial or additur, both of which were denied. The court awarded attorney's fees to Fountainhead as the prevailing party because Burton had failed to accept an Alaska Civil Rule 68 offer of judgment in an amount greater than the award of damages.^[2]

         Burton appeals. He argues that the superior court abused its discretion when it denied his post-trial motion to amend his complaint; that it erred in determining that Fountainhead was privileged to interfere with his employment relationship; that it misstated the legal standard for causation and erred in finding that he failed to prove this element of his tortious interference claims; that it erred in failing to include lost wages and benefits in its award of general damages; and that it erred in failing to award punitive damages.^[3]

         III. STANDARDS OF REVIEW

         We review a trial court's "decision to permit or deny an amendment to the pleadings ... for abuse of discretion."^[4] Abuse of discretion exists "when the decision on review is manifestly unreasonable."^[5]

         "In a bench trial, the judge is the trier of fact. . . ."^[6] We review the trial court's factual findings for clear error, as "[i]t is the function of the trial court, not of this court, to judge witnesses' credibility and to weigh conflicting evidence."^[7] Clear error exists "when 'after a thorough review of the record, we come to a definite and firm conviction that a mistake has been made.' "^[8] "[W]hether the superior court applied the correct legal standard is a question of law to which we apply our independent judgment."^[9]

         We note some inconsistency in how we have formulated our standard of review of a damage award made by a judge sitting as the finder of fact. In Breck v. Moore we said that we "review[] an award of damages for an abuse of discretion and independently review[] the law applied by the trial court, "^[10] and some later cases relied on Breck for this abuse-of-discretion standard.^[11] But Breck cited only Johnson v. Alaska State Department of Fish & Game, ^[12] which states, consistent with earlier cases, that the applicable standard is clear error except with regard to questions of law:

"[A] determination of damages by the trial court is a finding of fact which will not be disturbed on appeal unless clearly erroneous." State v. Guinn, 555 P.2d 530, 544-45 (Alaska 1976). We have reviewed the record in this case and[] we do not find clear error in any of the superior court's factual findings. However, we do not limit our review of the superior court's damages decision to simply an evidentiary review. "[T]his court will also intervene when the trial court's calculations are in disregard of a rule of law pertaining to damage measures." Id. at 545.^[13]

         Notwithstanding Breck, we again applied the clear error standard a year later. In Pluid v. B.K. we held that "[t]he determination by a trial court sitting as a finder of fact as to the proper amount to be awarded as compensatory damages is not to be disturbed on appeal unless it is clearly erroneous";^[14] we went on to say that as long as the trial court "follows the correct rules of law, and [its] estimation appears reasonable and is grounded upon the evidence, [its] finding will remain undisturbed."^[15] We applied the same standard in other cases.^[16]

         Even while applying the clear error standard of review, however, we have recognized that the fact-finder necessarily has some latitude in determining the amount of damages to award. "Certainly in many cases . . . some items of damage cannot be fixed with mathematical precision, " and "[i]n those instances the trial judge is necessarily forced to estimate."^[17] Reviewing an award of general damages in another defamation case, we observed that "the trier of fact [is permitted] a great deal of latitude in determining the magnitude of... damage awards, " and "[s]ince proof of damages is not required if words are deemed actionable per se, they clearly cannot be computed with mathematical certainty."^[18] We quoted a California case for the proposition that fixing "damages [for harm suffered to intangible interests such as reputation] has long been vested in the sound discretion of the trier of fact. . . subject only to the passion and prejudice standard."^[19] In short, a damages award, and particularly a general damages award, will often require the fact-finder to exercise some discretion along an acceptable continuum - unlike, for example, a finding about whether the traffic signal was red or green.

         At bottom, however, deciding the amount of compensatory damages is the job of the finder of fact, whether a jury or the judge in a bench trial; as such it is subject to the clear error standard of review. We do not review jury awards for an abuse of discretion, and we see no reason to review judges' awards differently when judges are performing the same fact-finder role. We take this opportunity to reaffirm that "[a] trial court's determination of damages is a finding of fact which we affirm unless it is clearly erroneous[, b]ut we apply our independent judgment in deciding whether the trial court's award of damages is based on an erroneous application of law."^[20]

         IV. DISCUSSION

         A. The Superior Court Did Not Abuse Its Discretion By Denying Burton's Post-Trial Motion To Amend His Complaint.

         Burton contends that Fountainhead's decision to republish Lanning's 2011 letter in its mid-trial correspondence with Princess was anew instance of defamation that the parties then litigated by consent. He argues that the superior court therefore abused its discretion when it denied his post-trial motion to amend his complaint to include a new defamation claim. But the record does not support the contention that the republication, though raised as an issue toward the end of trial, was then litigated as a separate claim.

         Under Civil Rule 15(b), "[w]hen issues not raised by the pleadings are tried by express or implied consent of the parties, they shall be treated in all respects as if they had been raised in the pleadings." But "[i]mplied consent... is ... difficult to establish and seems to depend on whether the parties recognized that an issue not presented by the pleadings entered the case at trial. If they do not, there is no consent and the amendment cannot be allowed."^[21] We have recognized trial by consent when the new issue was identified at the beginning of trial and litigated by both sides, ^[22] but not when the parties failed to actively litigate the claim^[23] or when one party did not have the opportunity to contest it.^[24]

         Here, though Fountainhead appears to concede on appeal that "the issues raised by the amendment" were tried by consent, ^[25] the record does not show that the issues were litigated as a new and separate claim. The issue of re-publication arose mid-trial when the superior court asked Fountainhead's president whether his company had ever informed Princess that Burton was not in fact "banned" from Fountainhead property, giving Princess the opportunity to correct its internal records about the reason for Burton's termination. The court "invite[d] the parties, while we have a break tonight, to look and see if they might not see how they could address this problem with what Princess heard in 2011 and maybe what Princess should have heard."

         The next day Fountainhead recalled Lanning, its manager of operations and personnel, to the stand as its last witness. Lanning testified that she had sent a letter to Princess the night before "[b]ecause the [c]ourt asked us to." The letter informed Princess that Burton had never in fact been "banned" from Fountainhead properties, and it included as an attachment the letter Lanning had sent Burton in May 2011 outlining the company's concerns about his attitude. The 2011 letter also mentioned "an incident where [Burton was not] supportive of a management decision while in the presence of guests, " while acknowledging that Fountainhead lacked any other details about that incident.

         The court interjected that it had intended something else: "[I]t wasn't that I said you should send any particular letter, the idea was to have you use the time to talk among yourselves to see if, perhaps, there is a way that you could help overcome this stigma on [Burton's] record." The court further observed, "I ...