## Facts

- Filene’s assessed “vendor violations” (charges) against vendors; vendors could seek refunds by submitting supporting documentation.
- Michael Phelan, an assistant director of accounts payable, supervised the vendor-refund process.
- Phelan learned from a subordinate of a backlog of refund requests and promptly reported an estimated exposure of about $200,000 to his supervisor; management later learned the backlog was substantially larger (about $491,995).
- Filene’s senior management suspected possible concealment of accounting discrepancies and initiated an internal investigation.
- During the investigation, Filene’s assigned a security officer to remain with Phelan continuously; he was escorted throughout the workplace, including to the cafeteria and restroom, in view of coworkers.
- Phelan testified the escorting was humiliating and drew attention from coworkers.
- Phelan was suspended, escorted out of the building, and later terminated.
- Phelan sued May Department Stores Company and two Filene’s executives for false imprisonment and defamation based on the investigation conduct.
- A jury found for Phelan on both claims and awarded $1,500 (false imprisonment) and $75,000 (defamation).
- The trial judge entered judgment notwithstanding the verdict (JNOV) for defendants on defamation, citing insufficient proof of publication/defamatory meaning and failure to overcome conditional privilege.
- The Appeals Court reversed the JNOV; the Supreme Judicial Court granted further appellate review.

## Issues

1. Whether nonverbal workplace conduct (continuous, conspicuous security escorting) can constitute a published defamatory communication to third parties without interpretive testimony from witnesses.
2. Whether evidence permitted a jury to find that defendants abused or forfeited an employer’s conditional privilege for internal-investigation communications through malice, recklessness, or improper purpose.

## Decision

- The Supreme Judicial Court affirmed the Appeals Court and reinstated the jury’s defamation verdict and damages.
- The evidence permitted a reasonable jury to find publication of a defamatory implication through defendants’ conspicuous conduct, even without witness testimony describing how coworkers interpreted it.
- The evidence also permitted a reasonable jury to find defendants abused the conditional privilege by acting recklessly or for an improper purpose through unnecessary, humiliating, and excessive measures.

## Legal Principles

- Defamation may be communicated by nonverbal conduct when the conduct reasonably conveys a defamatory meaning to observers.
- “Publication” may be proved by circumstantial evidence; a jury may infer how third parties would understand conduct based on common experience, without requiring interpretive testimony from observers.
- Employers have a conditional (qualified) privilege to communicate about suspected employee misconduct for legitimate business purposes to persons with a common interest.
- The conditional privilege is lost if the plaintiff proves malice, recklessness, or improper purpose, including excessive or unnecessarily humiliating dissemination beyond legitimate investigatory needs.
- On JNOV review, courts must view evidence in the light most favorable to the verdict and may not substitute the judge’s view of the facts for the jury’s reasonable inferences.

## Conclusion

The court held that conspicuous security escorting during an internal investigation could support a defamation verdict as a published defamatory implication, and that a jury could find the employer’s conditional privilege forfeited where the investigation methods were unnecessarily extreme and humiliating.


Phelan v. May Dep’t Stores Co., 443 Mass. 52 (2004)