The Washington state Court of Appeals has affirmed a $185,000 jury verdict in favor of a school district employee who claimed that the district defamed her in the course of investigating rumors that she was having an affair with the district’s superintendent. The case is notable both because plaintiff defamation verdicts are a rarity in Washington state, and because the opinion relies on a narrow reading of the “common interest privilege,” a defense frequently relied on in employment and other defamation cases. Valez-Zontek v. Eastmont School District, No. 27197-8-III (Wn. App. Jan. 12, 2010).

The plaintiff, who worked as special programs director for the Eastmont School District, was rumored to be engaged in an affair with the school superintendent. Both denied the rumor. The school board president investigated and found no evidence of an affair. Nevertheless, the rumor was discussed among district personnel, and spread to the community at large and to other school districts and state officials. According to the court, the school board took no steps to stop the rumor. The plaintiff sued the district for defamation, disparate treatment discrimination and retaliation, and infliction of emotional distress. The appeal focused primarily on the defamation verdict.

In its defense, the district asserted the common interest privilege, claiming that it was entitled to communicate the rumors as part of its investigation. The common interest privilege exists where the speaker and the recipient have a common interest in the subject matter of the allegedly defamatory statement. It applies within companies and other entities where parties need to speak openly about subjects of common organizational or financial interest. In this case, the Court of Appeals affirmed the jury’s finding that the district lost the privilege by spreading the rumor further than necessary during its investigation.

Washington Supreme Court decisions hold that qualified defamation privileges may be overcome only by a showing of “actual malice”—that is, “the defendant’s knowledge or reckless disregard as to the falsity of the statement.” Lillig v. Becton-Dickinson, 105 Wn.2d 653, 658, 717 P.2d 1371 (1986); Bender v. Seattle, 99 Wn.2d 582, 601-02, 664 P.2d 492 (1983). But instead of adhering to this authority, the Court of Appeals relied on one of its prior decisions, Moe v. Wise, 97 Wn. App. 950, 963, 989 P.2d 1148 (1999), which states that the common interest privilege may be “abused,” and lost, on showing less than actual malice.

For example, according to the court, the privilege could be lost through “excessive publication” or acting outside of the objectives of the privilege. Here, the court said that the district abused the common interest privilege because the jury could have found that district officials “spread the affair rumor well beyond the scope of any common interest privilege for investigating a possible conflict of interest, and that they did so with a high degree of awareness that the rumor was possibly false.”

The Court of Appeals also held that the plaintiff was a private figure for purposes of her defamation claim, which meant that she only had to prove negligence, rather than actual malice, to prove defamation. The court stated that although public school employees are public figures to the extent that their conduct affects their job duties, the plaintiff was a private figure because the unsubstantiated rumor of an alleged affair had “no bearing on the manner in which she performed her public duties.”

The decision serves as a reminder to employers and others in Washington that internal investigations of workplace behavior must be undertaken with care to avoid potential defamation liability. Any such investigation should be limited to matters pertinent to job performance, and discussion of allegations should be limited, as much as possible, to those directly involved in the investigation.