Celebration Fireworks, Inc. v. Smith

ATTORNEY FOR APPELLANT ATTORNEYS FOR APPELLEE

Casey D. Cloyd Martin D. Hoke
Muncie, Indiana Natalie Shrader
Schererville, Indiana

IN THE

SUPREME COURT OF INDIANA

CELEBRATION FIREWORKS, INC., )
)
Appellant (Plaintiff Below), ) Cause No. 50S03-9712-CV-657
) in the Supreme Court
v. )
) Cause No. 50A03-9612-CV-462
WAYNE SMITH, ) in the Court of Appeals
)
Appellee (Defendant Below). )

APPEAL FROM THE MARSHALL CIRCUIT COURT
The Honorable Bruce C. Embrey, Special Judge
Cause No. 50C01-9406-CP-54

May 1, 2000

SHEPARD, Chief Justice.

Celebration Fireworks, Inc. filed a defamation suit against the City
of Plymouth’s fire chief after the chief made statements about Celebration
while conducting an inspection at the premises of its prospective landlord.
The trial court granted summary judgment for the chief, ruling that the
suit was barred because Celebration did not comply with the notice
provisions of the Indiana Tort Claims Act. It also held that the chief’s
remarks were protected by qualified privilege.

The Indiana Court of Appeals reversed. Celebration Fireworks, Inc. v.
Smith, 682 N.E.2d 569 (Ind. Ct. App. 1997). We grant transfer. Ind.
Appellate Rule 11(B)(3).

The Events Themselves

Celebration Fireworks once rented property within the city limits of
Plymouth, and it had disputes with the city over the sale of fireworks. At
one point, Plymouth sought injunctive relief against Celebration.
Celebration contracted to rent space at George Kendall’s motorcycle
dealership because his building is one block outside the city limits.
Kendall’s shop is, however, within the Plymouth Fire Department’s service
area.

In the midst of the busy fireworks season on July 2, 1993, Plymouth
Fire Chief Wayne Smith went to conduct a safety inspection at Kendall’s
dealership, where Celebration was setting up shop. According to
Celebration’s complaint, Smith, in his capacity as fire chief, told the
lessor that “[t]hese people do not pay their bills.” (R. at 20.)[1] He
urged Kendall to “[g]et your money in advance,” and said, “These people are
gypsies.” (R. at 5.)

In a deposition, Kendall said he knew Smith in his capacity as fire
chief because Smith had been conducting fire inspections of Kendall’s
motorcycle business for about fifteen years. He testified that Smith told
him he was in the shop in his capacity as city fire chief. Kendall
recalled that Smith spent about five minutes in his shop and looked around
some before he left. He said Smith appeared “upset” that Celebration would
be renting space from him. (R. at 51-52.) During the visit Smith told him
that a firewall would have to be constructed to separate the fireworks sale
area from the rest of the motorcycle shop.

Celebration asserts Smith was attempting to talk Kendall out of
leasing the space in an effort to keep Celebration out of Marshall County.
Celebration also alleges it had to pay additional rent as a result of those
statements.

The Notice and the Lawsuit

Celebration filed a notice under the Indiana Tort Claims Act on
January 3, 1994, in an attempt to preserve any potential claim against the
City of Plymouth. Celebration Fireworks, 682 N.E.2d at 571. Celebration
later filed suit against Smith on June 3, 1994.

In his answer to the suit, Smith denied he ever made the statements
attributed to him. He also asserted Celebration’s complaint was governed
by the Tort Claims Act. Ind. Code Ann.
§ 34-4-16.5-1 (West 1983).[2] If so, it was barred because Celebration had
not filed notice of the claim within 180 days of the alleged tort, as
required by Ind. Code § 34-4-16.5-7 and Ind.

Code § 34-4-16.5-9. Smith also claimed he was immune from liability under
Ind. Code § 34-4-16.5-3(13).[3]

In a motion for summary judgment, Smith asserted that a January 3,
1994 letter from Celebration’s attorneys to the Mayor of Plymouth that
contained the notation “Tort Claims Notice” was intended to serve as a tort
claims notice required by Ind. Code § 34-4-16.5-7 and Ind. Code § 34-4-16.5-
9. (R. at 13-14.) As such, that notice was due on or before December 29,
1993, Smith argued.

In granting Smith’s motion for summary judgment, the trial court
determined Smith was acting within the scope of his employment as fire
chief when he inspected Kendall’s store. Any statements he made were
either within the scope of his employment or made in good faith and
protected by qualified privilege. Further, the trial court determined that
a tort claim against the City of Plymouth had not been filed in time.

On appeal, the Court of Appeals focused on two issues. The first was
whether Smith’s conduct was within the scope of employment, so as to
trigger the Tort Claims Act.
His statements about Celebration’s bill-paying history, it said, were made
on his own initiative and not in service to his employer. Celebration
Fireworks, 682 N.E.2d at 572. Because the statements were made outside the
sphere of his employment, the Court of Appeals concluded, the notice
provision of the Tort Claims Act did not apply and operate to bar
Celebration’s claim. Id.

The Court of Appeals also reviewed Smith’s claim of qualified
privilege. It held that conflicting inferences over whether Smith’s
statements were motivated by ill will precluded a grant of summary judgment
on the issue of qualified privilege. In light of these conclusions, the
Court of Appeals reversed the trial court’s grant of summary judgment. Id.

Scope of Employment

The Tort Claims Act governs lawsuits against political
subdivisions like the City of Plymouth and against their
employees. It requires early notice that a claim exists, and it
provides
substantial immunity for conduct within the scope of the
employees' employment.

"The purpose of immunity is to ensure that public employees
can exercise their independent judgment necessary to carry out
their duties without threat of harassment by litigation or
threats of litigation over decisions made within the scope of
their employment." Indiana Dept. of Correction v. Stagg, 556
N.E.2d 1338, 1343 (Ind. Ct. App. 1990), trans. denied. The Tort
Claims Act bars suits for which timely notice has not been
given.

Much of the caselaw examining the acts of governmental
employees has revolved around various immunities specified in
the Tort Claims Act. See, e.g., Foster v. Pearcy, 270 Ind. 533,
387 N.E.2d 446 (1979) (defamation suit against prosecutor barred
by discretionary function immunity), cert. denied, 445 U.S. 960
(1980); Jacobs v. City of Columbus, 454 N.E.2d 1253 (Ind. Ct.
App. 1983) (defamation suit against police detectives barred
under discretionary function and failure to enforce law
immunities).

We have opined, without deciding, that these immunities
might be lost when an employee acts “so far out of the scope of
his or her employment as to amount to fraud or criminal
conduct.” Poole v. Clase, 476 N.E.2d 828, 831 (Ind. 1985). In
Seymour Nat’l Bank v. State, 428 N.E.2d 203, 204 (Ind. 1981), we
touched on the same issue by saying immunity might be lost if
conduct were so “outrageous as to be incompatible with the
performance of the duty undertaken.” Our more recent
pronouncements, including our overruling of Seymour Nat’l Bank,
suggest that governmental employers will not be broadly immune
under some of these provisions. See Quakenbush v. Lackey, 622
N.E.2d 1284 (Ind. 1993) (city where officer drove squad car at
night without using headlights not immune under “failure to
enforce law”).

The threshold question in this case is whether the Tort
Claims Act applies at all to the acts by Smith that gave rise to
the suit. That is, was Smith acting “within the scope of his
employment”?

The Restatement of Agency provides some general guidance
for assessing the type of conduct that is within the scope of
employment: "To be within the scope of the employment, conduct
must be of the same general nature as that authorized, or
incidental to the conduct authorized." Restatement (Second)
Agency § 229 (1958).

The Restatement stresses that “[t]o be incidental, however,
[an act] must be one which is subordinate to or pertinent to an
act which the servant is employed to perform.” Restatement
(Second) Agency § 229 cmt. b (1958). Even tortious acts may
fall within the scope of employment. In Kemezy v. Peters, 622
N.E.2d 1296 (Ind. 1993), we said an employee's tortious act may
fall within the scope of his employment "if his purpose was, to
an appreciable extent, to further his employer's business."
Kemezy, 622 N.E.2d at 1298 (quoting Stropes v. Heritage House
Childrens Ctr., 547 N.E.2d 244, 247 (Ind. 1989)).

The U.S. Supreme Court recently noted that this doctrine
“has traditionally defined the ‘scope of employment’ as
including conduct ‘of the kind [a servant] is employed to
perform,’ occurring ‘substantially within the authorized time
and space limits,’ and ‘actuated, at least in part, by a purpose
to serve the master,’ but as excluding an intentional use of
force ‘unexpectable by the master.’” Faragher v. City of Boca
Raton, 524 U.S. 775, 793 (1998) (quoting Restatement (Second)
Agency § 228(1)).

Plainly, Smith was on public time, performing a function
that was central to the position he held. As the Restatement
suggests, this is a pretty good start, but it may not always be
dispositive. The task is thus to decide whether the fire chief’s
statements were “incidental to the conduct authorized” as the
Restatement puts it, or as our opinion in Kemezy said, “to an
appreciable extent to further his employer’s business.”

The VanWalkenburg Formulation

During his service on the Court of Appeals, Justice Rucker
provided a helpful way of answering such a question in
VanWalkenberg v. Warner, 602 N.E.2d 1046 (Ind. Ct. App. 1992).
Julie VanWalkenberg was a student in a class taught by Warner at
Indiana State University. Upon leaving the course’s final
session, held at Warner’s residence, she fell on the front porch
and broke her ankle. Without filing a tort claim notice on
either the university or Warner, she sued Warner for negligent
maintenance of his home. Warner claimed the protection of the
Tort Claims Act, saying he was acting within the scope of his
employment when he conducted the class.

Relying on our opinion in Poole v. Clase, 476 N.E.2d 828
(Ind. 1985), the VanWalkenberg court held that “governmental
employment, standing alone, does not trigger the notice
provisions of the Indiana Tort Claims Act.” VanWalkenberg, 602
N.E.2d at 1249. Rather, the court said, “notice is required
only if the act or omission causing the plaintiff’s loss is
within the scope of defendant’s employment.” Id. It concluded
that since maintenance of Warner’s residence was not a thing he
did in service of the university, it was beyond the scope of his
employment.

In this case, “the act causing the plaintiff’s loss”
consisted of several statements, three sentences in all, that
were part of a longer discussion between the fire chief and the
owner of a business being inspected prior to the start of
Celebration’s tenancy. We think that splitting out these
sentences so as to place Smith outside the scope of his
employment puts too fine a point on the matter and helps neither
employees nor claimants.

If employees were easily declared outside the scope of the
act for things they say during the otherwise ordinary course of
their employment, the threat to “their independent judgment
necessary to carry out their duties,” Stagg, 556 N.E.2d at 1343,
would be greater. Morever, claimants would more often find
themselves limited to recovery against the private assets of
employees rather than those of governments.

This is not to say whether, had notice been given,
Celebration might have been entitled to a judgment or whether
the chief might have been entitled to one of the enumerated
immunities of the Act. We conclude only that Judge Embrey was
correct in holding that the chief’s statements were incidental
to an activity that was part of the chief’s duty, inspecting
business premises.

Conclusion

Accordingly, we affirm the judgment of the trial court.

Sullivan, Boehm, and Rucker, JJ., concur
Dickson, J., not participating.
-----------------------
[1] In a later deposition, the chief said that Celebration’s former
landlord, Rick Miller, told him the fireworks seller had not paid all of
its rent. (R. at 26, 28-29.)
[2]Title 34, including the provisions containing the Tort Claims Act,
was repealed and recodified at Ind. Code § 34-13-3. For clarity, all
citations to the Tort Claims Act in this opinion reflect the applicable
statutes at the time of the lawsuit.

[3] That section, in relevant part, provides:

A governmental entity or an employee acting within the scope of the
employee’s employment is not liable if a loss results from: . . .

(13) misrepresentation if unintentional[.]