Attorneys for Appellant Attorneys for Appellees
James R. Fisher Janet A. McSharar
Debra H. Miller Indianapolis, Indiana
Indianapolis, Indiana
James Hanner
Thomas Schulte Rockville, Indiana
Indianapolis, Indiana
John Daerr
Amicus Curiae, United Seniors Action Indianapolis, Indiana
George Clyde Gray
Daniel L. Robinson
Indianapolis, Indiana
___________________________________________________________________________
In the
Indiana Supreme Court
_________________________________
No. 61S01-0212-CV-00637
Mark R. Passmore,
As Personal Representative of the
Estate of Eva L. Passmore and
Mark R. Passmore, Individually,
Appellant (Defendant below),
v.
Multi-Management Services, Inc.
d/b/a/ Parke County Nursing Homes,
Indiana Health Management Corp., and Appellees (Plaintiff below).
Lee Alan Bryant Health Care Facilities, Inc.
_________________________________
Appeal from the Parke Circuit Court, No. 61C01-9805-CP-102
The Honorable Ronda R. Brown, Judge
_________________________________
On Petition to Transfer from the Indiana Court of Appeals, No. 61A01-0108-
CV-286
_________________________________
June 29, 2004
Shepard, Chief Justice.
A nursing home hired a new worker in part on the basis of a favorable
recommendation from his former employer. The claim is that this worker
assaulted a patient. The patient asserts that the former employer wrongly
gave a favorable recommendation and thus should be liable for the injury.
The Court of Appeals affirmed summary judgment for the former employer,
holding that there is no basis for liability running to patients of other
nursing homes. We hold that former employers may be liable for knowing
misrepresentation, adopting § 310 of the Restatement (Second) of Torts.
Statement of Facts and Procedural History
Eva Passmore was an Alzheimer’s patient who resided at the Parke
County Nursing Home (“Parke County”). On November 27, 1997, she exhibited
signs of pain when the nurses moved her. Further examination revealed a
bruise on her lower abdomen, just above the pubic bone. After consultation
with her physician, her son, and the facility’s social service director,
the attending nurses were directed to have the seatbelt on her wheelchair
evaluated and repositioned.
Mark Passmore, Mrs. Passmore’s son and personal representative,
believes that the bruise was the product of an assault by Parke County’s
maintenance supervisor Charles Richardson. He sued Parke County and
Richardson’s former employer Lee Alan Bryant Nursing Care Facilities, Inc.
(“Lee Alan”).
Before going to work at Parke County, Richardson was a maintenance
worker for Lee Alan. Lee Alan’s residential supervisor of psychiatric
patients, Beth Bratcher, had received several reports from residents who
were Alzheimer’s patients alleging misconduct between Richardson and some
of the female residents in the nursing home. These were not formal
complaints, but Bratcher looked into various reports and rumors;
ultimately, she was unable to verify them. Bratcher informed the facility
administrator, but never conducted a formal investigation or generated a
written report.
Richardson was interested in a higher paying job, and he applied for a
supervisory position at Parke County. Parke County sent Lee Alan a pre-
printed reference form. Lee Alan administrator Susan Hein filled out the
form by indicating Richardson would be eligible for re-hire at Lee Alan and
checking boxes reflecting that he had generally performed his job
adequately. Hein and William Collins, Richardson’s direct supervisor,
later stated they never heard accusations that Richardson was ever sexually
involved with a Lee Alan resident while he was employed.
Parke County subsequently closed and reopened as Parke County
Residential Care Center. There were rumors about Richardson at Parke
County, but again nothing particularly tangible. Passmore’s daughter
worked at Parke County and heard stories about Richardson, but was not
moved to act. Parke County later fired Richardson for having sexual
relations with a mentally infirm resident. (Passmore App. at 152-155.)
The Parke Circuit Court granted summary judgment in favor of Lee Alan.
The Court of Appeals affirmed, stating that Indiana does not recognize
conscious or negligent misrepresentation. Passmore v. Lee Alan Bryant
Health, 765 N.E.2d 625 (Ind. Ct. App. 2002). We granted transfer. Ind.
Appellate Rule 58.
Passmore asks this Court to hold that a regulated nursing facility
owes a duty to third persons not to misrepresent material facts which
describe qualifications and character of a former employee. He says that
Sections 310 and 311 of the Restatement (Second) of Torts should apply.
These allow for the recovery of damages for physical harm that results from
a reasonable reliance on conscious or negligent misrepresentation.
Indiana has recognized liability for the tort of negligent
misrepresentation, where there is a direct relationship between the
plaintiff and defendant. Darst v. Illinois Farmers Ins. Co., 716 N.E.2d
579 (Ind. Ct. App. 1999); See Eby v. York-Division, Borg Warner, 455
N.E.2d 623 (Ind. Ct. App. 4 Dist. 1983) (applied negligent
misrepresentation under Restatement (Second) of Torts § 552 (1977)). We
have declined several opportunities to extend that liability, but we are
persuaded that this occasion warrants doing so.
Conscious Misrepresentation
Other than the fact that we have not said so before, we can think of
no reason why one who knowingly supplies false information in response to
an employment inquiry should not be liable for physical injury that flows
thereafter. Section 310 of the Restatement (Second) of Torts, defines this
liability as follows:
An actor who makes a misrepresentation is subject to liability to
another for physical harm which results from an act done by the other
or a third person in reliance upon the truth of the representation, if
the actor
a) intends his statement to induce or should realize that it is likely
to induce action by the other, or a third person, which involves an
unreasonable risk of physical harm to the other, and
b) knows
i. that the statement is false, or
ii. that he has not the knowledge which he professes.
Section 310 requires an affirmative misrepresentation. And as Passmore
observes, it is not a defense to such a claim that the supplier of the
misrepresentation did not intend that harm occur:
The rules stated in this Section relates to misrepresentation which,
though intended to mislead another, are not intended to cause him the
physical harm, where, however, the actor should realize that the harm
is likely to result from the action which his misrepresentation is
likely to induce. His liability is based upon the unreasonable risk
of physical harm which is involved in the misrepresentations, and not
upon the fact that the misrepresentations are intended to mislead.
Restatement (Second) of Torts, Section 310, Comment (a)
We think the formulation of § 310 fits well for allegations such as
those in this case, as it did in Randi W. v. Muroc Joint Unified School
Dist., 14 Cal.4th 1066, 929 P.2d 582 (1997), when the California Supreme
Court applied §310 to employment recommendations. There, a former employer
who knew that the employee had committed certain offensive sexual acts gave
a letter of recommendation that vouched for him without reservation. The
California court said:
Although policy considerations dictate that ordinarily a recommending
employer should not be held accountable to third persons for failing
to disclose negative information regarding a former employee,
nonetheless liability may be imposed if, as alleged here, the
recommendation letter amounts to an affirmative misrepresentation
presenting a foreseeable and substantial risk of physical harm to a
third person.
Randi W., 992 P.2d at 584 (emphasis in original). The court further held
that the causal link between the employment recommendation and the assault
was foreseeable:
Based on the facts alleged in the complaint, defendants could foresee
that Livingston’s officers would read and rely on defendant’s letters
in deciding to hire Gadams. Likewise, defendants could foresee that,
had they not unqualifably recommended Gadams, Livingston would not
have hired him. And, finally, defendants could foresee that Gadams,
after being hired by Livingston, might molest or injure a Livingston
student such as plaintiff.
Id. at 589.
Amicus United States Action correctly observes that residents of a
nursing home which have relied on false information acquired during a hire
are foreseeable victims of the misrepresentation. (Amicus Br. at 3.) It
further notes that imposing liability under such circumstances would be
consistent with this Court’s earlier holding about the special care owed
nursing home patients. Stropes v. Heritage House Children’s Ctr., 547
N.E.2d 244 (Ind. 1989).
The facts before the trial court on summary judgment do not reflect
that Lee Alan had any substantial information indicating that Richardson
had committed sexual misconduct with residents at Lee Alan when Hein
completed a standard preprinted reference form. Bratcher had been unable
to substantiate what she had heard about Richardson.[1] This may have
constituted negligence, but it was not the stuff of knowing
misrepresentation. Even adopting as we do the rule of § 310, summary
judgment for Lee Alan on this point was warranted.
Negligent Misrepresentation
That takes us to the question whether we should embrace § 311, which
among other contexts contemplates liability for injury caused by negligent
employment references.[2]
Imposing liability for negligence in supplying employment
recommendations poses rather more complex competing policies. See Susan
Oliver, Opening the Channels of Communication Among Employers, Can
Employers Discard Their “No Comment” and Neutral Job Reference Policies?,
33 Val. U.L. Rev. 687 (1999) (discussing employers’ dilemma of disclosing
or omitting negative information in an employment reference about a former
employee.) Recommendations from former employers are commonly used
throughout the American economy as a basis for judging future job
performance and reliability. The free flow of information about
performance helps prospective employees, prospective employers, and the
economy in general.
Our approach to this question is informed by our decision concerning
intra-employer assessments of performance. In Bals v. Verduzco, 600 N.E.2d
1353 (Ind. 1992), we observed that employees do not relinquish their good
reputation simply by becoming employees and are entitled to present
defamation claims for falsehoods spread about them. Id. at 1355. In
Bals, a discharged worker had sued his former supervisor for defamation
over a series of adverse employee evaluations. We held that these reports
had been “published” for purposes of defamation law even though they had
been shared only with appropriate officers inside the company. Id. at
1356.
On the other hand, we observed that “free and open intracompany
communications and legitimate human resource management needs” play an
important role in the economy. Id. at 1356. We held that “protect[ing]
personnel evaluation information communicated in good faith” warranted
conferring a qualified privilege on the communication. Id. Absent a
factual dispute, whether a statement is protected by a qualified privilege
is a question of law. Id.; Lawson v. Howmet Aluminum Corp., 449 N.E.2d
1172, 1175 (Ind. Ct. App. 1983).
A statement protected by a qualified privilege may lose its privileged
character upon a showing of abuse wherein: (1) the communicator was
primarily motivated by ill will in making the statement; (2) there was
excessive publication of the defamatory statements; or (3) the statement
was made without belief or grounds for belief in truth. Bals, 600 N.E.2d
at 1356. Indiana precedent teaches that we prefer broader latitude be
given by the qualified privilege than that provided by the Restatement §
600. Id. at 1356 n. 4. The defendant has the burden of proving that
privilege existed on that particular occasion. Id. Thereafter, the
plaintiff must prove that “it has been abused by excessive publication, by
use of the occasion for an improper purpose, or by lack of belief or
grounds for belief in the truth of what is said.” Id. at 1357.
Much the same set of considerations applies to job references provided
by one employer to another. Such recommendations should not be filled with
rumors and innuendo instead of facts. Without substantial evidence,
employers would subject themselves to possible defamation litigation, and
rightly so.
On the other hand, we think it rather obvious that declaring
employers liable for negligence in providing employment references will
lead universally to employer reluctance to provide any information other
than name, rank, and serial number. Only those employers dull-witted
enough to issue free-wheeling assessments without calling their lawyers
would supply any but the most rudimentary information. A legal policy that
discourages providing assessments to subsequent employers will not make for
safer nursing homes, or other safe workplaces, for that matter. We
therefore decline to adopt § 311 as it applies to employment references.
It was appropriate to grant judgment to Lee Alan on Passmore’s claim of
negligent misrepresentation.
Conclusion
We affirm the judgment of the trial court.
Dickson, Sullivan, Boehm, and Rucker, JJ., concur.
-----------------------
[1] Even the benefit of hindsight and investigation has produced little
information to suggest that Richardson assaulted Ms. Passmore. The record
at summary judgment demonstrates only that Ms. Passmore had a bruise, that
there had been unverifiable reports about Richardson and that Richardson
had access to the patients. That Parke County fired him years later for
sexual misconduct does not reflect on what Lee Alan knew in 1996. Counsel
for Passmore seems to assert that Lee Alan knew that Richardson’s son had a
sexual encounter with a patient and they later gave him a positive
recommendation without reporting the incident to the State Department as
required by law. (Appellant’s Br. at 6-7; Appellant’s App. at 89, 94.)
[2] Restatement (Second) of Torts § 311 states:
An entity may be liable for negligent misrepresentation when one
negligently gives false information to another. That entity is subject to
liability for physical harm caused by:
1) Action taken by the other in reasonable reliance upon such
information, where such harm results;
a. To the other, or
b. To such third persons as the actor should expect to be put in
peril by the action
taken.
2) Such negligence may consist of failure to exercise reasonable care
a. In ascertaining the accuracy of the information, or
b. In the manner in which it is communicated.