Suing for Reputational Harm Resulting from Negligent Record Keeping

 
The importance of accurate personnel records in the hands of public and private actors alike cannot be understated. From financial loans to college admissions, these records often serve as the basis for life-changing (for better or worse) administrative decisions. Nonetheless, inaccuracies can happen. When they do, they can lead to adverse administrative decisions that can in turn cause reputational harm. If a record keeper’s failure to adhere to a reasonable standard of care causes someone economic or reputational damages, the injured party could have a claim for negligent record keeping.

Negligent record keeping occurs when the defendant’s negligent maintenance of personnel records causes damage to the plaintiff. The damages from negligent record keeping generally take the form of adverse administrative action against the plaintiff and run the gamut from the denial of a financial loan to even arrest. However, damages may also result in reputational harm. For example, an inaccurate record stating a person was “let go” for stealing from a cash register (when in reality they amicably resigned) puts the individual at risk of both being cast as a criminal in their community and unfit for their trade. But even so, recovering for reputational harm from negligent record keeping is not as black and white as it might sound and is prone to a variety of hurdles depending on whether the negligent record keeper worked for the government or a private company.[1]

Federal Government 

Tort claims against the federal government or its agents are made possible by the Federal Tort Claims Act (“FTCA”). While the FTCA does permit private parties to sue the United States government in a federal court for most torts committed by its agents, many of the more traditional theories of recovery for reputational harm, including defamation and misrepresentation, are banned under Section (h) of the FTCA. Although negligent record keeping itself is not included among the list of FTCA exceptions, the reputational harm implicit in many negligent record keeping claims has given courts pause as to whether or not a negligent record keeping claim is actually a barred misrepresentation or defamation claim in disguise. In reconciling negligent record keeping claims with the FTCA’s statutory bar to defamation and misrepresentation, federal courts turn to one of the two approaches found in the court rulings of Quinones v. United States and Jimenez-Nieves v. United States.

In Quinones v. United States, a former federal employee brought suit against the federal government when it incorrectly recorded that he had been a substandard employee and, in turn, damaged his reputation and prevented him from finding employment elsewhere. In coming to its ruling in favor of the former employee, the Third Circuit recognized that the federal government had two distinct duties: the duty to disseminate accurate information and the duty to maintain accurate records. See Quinones v. United States, 492 F.2d 1269, 1280 (3d Cir. 1974). The court held that negligent record keeping claims are barred by the Section (h) exclusion for misrepresentation in cases concerning the duty to disseminate accurate information. Conversely, negligent record keeping claims with respect to the duty to maintain accurate records, such as that of the former federal employee, may proceed under the FTCA. Id.

Although some courts follow the Quinones ruling, the approach of the Jimenez-Nieves court trumps the former in terms of popularity, including within Colorado’s very own Tenth Circuit. Trentadue v. United States, 386 F.3d 1322, 1334 (10th Cir. 2004). In Jimenez-Nieves, the plaintiff brought an action against the Social Security Administration for injury to his reputation after his credit score dropped and he was investigated for fraud following a bookkeeping error by the Social Security Administration which caused his social security payments to be dishonored. Jimenez-Nieves v. United States, 682 F.2d 1, 6 (1st Cir. 1982). While the plaintiff did not plead defamation in his complaint, the Jimenez-Nieves court looked outside the four corners of the pleadings and found that the plaintiff’s claims involving injury to reputation were in essence defamation claims and thus barred by the FTCA. Id. at 6. The court reasoned that the agency‘s actions in dishonoring the checks implicitly communicated defamatory statements, and, as a result, were actually claims for defamation in the guise of negligence. Id.

Non-Governmental Actors in Colorado          

As with the FTCA, suing a non-governmental actor, such as a former private employer, for negligent record keeping comes with its own set of obstacles. State courts, like the federal courts, must distinguish between negligent record keeping claims for reputational damages and defamation. However, this distinction is not necessitated by an explicit statutory bar, but rather the different levels of mental culpability required by the different claims. As defamation is an intentional tort, a defendant may demonstrate he or she did not intend to commit the act or cause the resulting harm to escape liability. In the case of a true negligence claim, the defendant only needs to fail to take reasonable care to protect against the harm: whether they intended for their act to cause harm is largely irrelevant. When it comes to suing for reputational harm caused by negligent record keeping, the majority of courts adhere to the rationale that if a negligence claim is in essence one for defamation, it is displaced by the torts of libel and slander. Singer v. Beach Trading Co., Inc., 379 N.J. Super. 63 (App. Div. 2005); Morrison v. Nat’l Broad. Co., Inc., 227 N.E.2d 572, 574 (N.Y. 1967); Lawrence v. Grinde, 534 N.W.2d 414 (Iowa 1995). Put more simply, a plaintiff cannot use a claim for negligence to circumvent all the elements of defamation.

Although Colorado case law is largely silent on the viability of recovering for reputational harm from negligent record keeping, Colorado courts likely falls in line with the majority of state courts. Evidence of this can be gleaned from the court ruling in Williams v. Continental Airlines, Inc., a case where the Colorado Court of Appeals rejected an employee’s claim against their employer and supervisor to recover noneconomic damages for injury to reputation from a “negligent investigation.” Williams v. Continental Airlines, Inc., 943 P.2d 10 (Colo. App. 1996), cert. denied (1997). In coming to its ruling, the court explicitly refused to recognize a claim for “negligent investigation” where the circumstances involved damages to reputation. Citing the California District Court’s ruling in Packar v. Package Machinery Co., that “plaintiffs may not avoid the strictures of defamation law by artfully pleading their defamation claims to sound in other areas of tort law,” the court further explained that allowing a plaintiff to recover for negligent conduct goes against the tradition of common law in Colorado to require a higher degree of mental culpability. Id.

Conclusion

When faced with reputational harm due to an inaccurate personnel record, the injured party should contact a civil attorney as soon as possible to determine the viability of their claim in a federal or state court. As explained above, whether or not a negligent record keeping claim is truly defamation or negligent misrepresentation will decide not only the level of proof to successfully charge the defendant, but also how long the injured party has to bring their claim. Because the statute of limitations for defamation and negligent record keeping differs between one and two years respectively, time is truly of the essence when filing a negligent record keeping claim for reputational harm. Should the injured party mistakenly believe their claim is a purely negligent record keeping claim and wait to file after a year, failing to file the claim might result in losing the opportunity to bring the claim altogether.

[1] The Colorado Governmental Immunity Act governs the circumstances under which a person may maintain a tort action against the state, its political subdivisions, and its employees. Mesa County Valley Sch. Dist. v. Kelsey, 8 P.3d 1200 (Colo. 2000). The state of Colorado must waive its sovereign immunity before consenting to be sued for a tort, unless there is an exception under Colorado Revised Statute 24-10-106. See Lehman v. City of Louisville, 857 P.2d 455, 456 (Colo. App. 1992). Negligent record keeping is not an exception. See Colo. Rev. Stat. 24-10-106 (2014).

By Cassandra Kirsch, HopkinsWay PLLC. | © HopkinsWay PLLC 2014. All rights reserved.

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