Whole Foods' Statements in News Stories Shortly After Employees Were Terminated Allows Defamation Claim to Proceed

Vasquez, et al v. Whole Foods Market, Inc. - United States District Court, District of Columbia

Facts:  Victor Vasquez, Nadeem Sheikh, Katia Sadoudi, Svetlana Bautista, Ibrahima Ba, Nicholas Miano, Pa M. Mjie, Michael Amegnaglo, and David Berger ("Plaintiffs") worked as Store Team Leaders at different Whole Foods stores in the Washington, D.C. area.  During their time working at Whole Foods, Whole Foods used a profit sharing program called "Gainsharing".  Under this Gainsharing program, Whole Foods awarded bonuses to employees whose departments performed under budget by distributing the surplus savings among the employees in that department.  However, the Plaintiffs claimed that Whole Foods undermined this program by imposing a nationwide scheme of "shifting" labor costs.  Under this alleged scheme, if a department came in over budget, Whole Foods corporate leadership instructed store leadership (including Store Team Leaders) to "shift" the labor costs of that department to a department that had a budget surplus.  Payroll Specialists at a Whole Foods store would then effectuate labor cost shifting by manually altering employee time records and submitting the manipulated records to corporate headquarters for payroll processing.

The Plaintiffs were all interviewed by Whole Foods investigators prior to their termination and stated that shifting labor costs was a standard practice throughout Whole Foods stores.  Some of the Plaintiffs also stated they received explicit instructions from corporate officials at Whole Foods to do so.  Shortly after the Plaintiffs were terminated, an Associated Press article titled "Whole Foods Fires 9 Store Managers Over Bonus Manipulation" reported that nine store managers in the Washington, D.C. area were dismissed after a company wide investigation determined the managers were engaged in a policy infraction that allowed managers to manipulate the profit sharing program.  The Associated Press article attributed Whole Foods' statements and details about the investigation to a Whole Foods spokeswoman.  A subsequent article in The Washington Post titled "Whole Foods Fires Managers in Md., Va., and D.C. for Manipulating Bonus System" was printed in which Whole Foods confirmed the nine managers were fired for manipulating the store bonus program.  None of the news stories specifically identified any of the Plaintiffs by name, however.

After being terminated, the Plaintiffs brought suit and alleged they were wrongfully terminated by Whole Foods in retaliation for blowing the whistle on the allegedly improper manner in which the company conducted its Gainsharing program.  Following their terminations, the Plaintiffs alleged that Whole Foods defamed them by falsely accusing them (via published news stories) of manipulating the Gainsharing program for their own benefit.  Whole Foods subsequently moved to dismiss the claims.

Holding:  (Note, this case brief analyzes only the Court's consideration of the defamation claim).  To establish a valid defamation claim, a party must show 1) that the defendant made a false and defamatory statement concerning the plaintiff; 2) that the defendant published the statement without privilege to a third party; 3) that the defendant's fault in publishing the statement amounted to at least negligence; 4) either that the statement is actionable as a matter of law irrespective of special harm or that its publication caused the plaintiff special harm.

Of or Concerning the Plaintiffs

At the outset, Whole Foods argued that the Plaintiffs could not establish the first defamation prong as any statements made in the news stories did not name or disclose any personal information to identify any particular Plaintiff.   However, the Court noted that a prior D.C. Circuit case had established that a defendant can make a false and defamatory statement of and concerning a plaintiff without specifically identifying the plaintiff by name.  As that prior case held, "When a statement refers to a group, a member of that group may claim defamation if the group's size or other circumstances are such that a reasonable listener could conclude the statement referred to each member or 'solely or especially' to the plaintiff.'"  In addition, a plaintiff can rely upon extrinsic evidence to show that listeners understood the statements pertain to the plaintiff.

In this instance, the Court held that sufficient facts had been plead to establish the first prong, although none of the Plaintiffs were specifically named in the news stories.  The statements made in the news stories would not require a large inferential leap to think that the Plaintiffs' colleagues at Whole Foods would have known about the terminations and reasonably believed that the statements referred to the Plaintiffs.  Given the temporal proximity between the Plaintiffs' termination and the publication of the statements in various news stories, the Court held that it was plausible to infer that "a listener could perceive that the [Plaintiffs] [are] connected to [wage theft and bonus manipulation]."

Capable of Bearing a Defamatory Meaning & Highly Offensive to a Reasonable Person

District of Columbia law has established "a statement is 'defamatory' if it tends to injure the plaintiff in his trade, profession or community standing, or lower him in the estimation of the community."  As with much of the legal analysis of a defamation claim, "context is key to determining whether...a statement is capable of bearing a defamatory meaning."

The Court held that the allegations, as plead by Plaintiffs, "easily satisfy" this standard.  When looking at the statements made by the spokeswoman, Plaintiffs were painted as cheats and thieves.  The Court noted it would not be a stretch to find these statements, if false, would injure Plaintiffs in their profession and community and "would be offensive to a reasonable person."

Statements are Attributable to Whole Foods

Whole Foods argued that of the eight allegedly defamatory statements, only four were quotes directly attributable to the spokeswoman.  As a result, Whole Foods argued the Plaintiffs' claims with regard to the remaining statements should be dismissed.  However, the Court disagreed and held that at this stage of litigation, what only "mattered" was that the Plaintiffs had successfully plead at least some actionable statements.  Discovery would bear out whether the remaining statements were attributable to Whole Foods.

Judgment:  The District Court denied Whole Foods' motion to dismiss the defamation claim brought by the Plaintiffs on the grounds that the Plaintiffs had plead sufficient facts to establish that Whole Foods and its spokeswoman might have defamed the Plaintiffs in news stories after the Plaintiffs were terminated.

The Takeaway:  I caution readers to not read too much into the Court's ruling here.  Yes, the facts as alleged by the Plaintiffs paint a picture of Whole Foods potentially engaging in defamatory conduct after the Plaintiffs were terminated.  However, as the Court noted, the matter before the Court was Whole Foods' motion to dismiss the Plaintiffs' claims rather than a trial on the merits.  In order to survive this motion, the Plaintiffs must have plead facts, which if true, could establish a valid cause of action (namely a valid defamation claim).  Based upon the facts in the record, it appears the Plaintiffs met their initial burden.  As the opinion notes, there were approximately eight different defamatory statements attributable to Whole Foods that appeared in news stories shortly after the Plaintiffs were terminated.  These statements could lead a reader to think that the Plaintiffs were terminated for underhanded conduct and attempting to manipulate the Gainsharing program, as the statements suggested.  Quite simply, at this stage of litigation, the Plaintiffs met their burden by pleading sufficient facts to establish that if the statements made by Whole Foods were false, a valid defamation claim could exist.

I do caution readers that attempting to prove defamation of a group is often difficult.  However, as the Court pointed out in this case, context is important and can be considered when evaluating whether defamation occurred.  In this instance, given that the news stories appeared so quickly after the Plaintiffs were terminated, I tend to agree with the Court's reasoning that someone who knew of the situation (and termination) would believe that Whole Foods was alleging that the Plaintiffs were terminated for improperly "gaming" the Gainsharing program.  If these statements turn out to be false, the Plaintiffs may indeed have a valid defamation claim.  However, this case has a ways to go before a jury ultimately decides whether Whole Foods defamed the Plaintiffs...it will be interesting to see how this plays out.

Majority Opinion Judge:  Judge Mehta

Date:  February 9, 2018

Opinion:  http://hr.cch.com/eld/VasquezWholeFoods020918.pdf