CHICAGO — A state appeals panel has shut out a group of former Allstate employees from continuing their defamation lawsuit against their former employer, as they try to breathe new life into a lawsuit in which they had at one time secured a $27 million verdict, only to lose it on appeal.
The June 14 opinion of the First District Appellate Court comes almost three years after the U.S. Seventh Circuit Court of Appeals, on Oct. 31, 2018, vacated the 2016 award to former portfolio security analysts who accused Allstate of ruining their careers by allegedly incorrectly reporting to federal regulators that the analysts padded their bonus pay while pension funds were shorted.
In the 2018 ruling, the Seventh Circuit panel said the plaintiffs lacked standing to bring their sole federal claim. The plaintiffs then brought their complaint to Cook County Circuit Court, where Judge Patrick Sherlock dismissed the claims with prejudice. Justice Daniel Pierce wrote the First District panel’s opinion; Justices Michael Hyman and Mary Ellen Coghlan concurred.
Allstate fired plaintiffs Daniel Rivera, Stephen Kensinger, Deborah Joy Meacock and Rebecca Scheuneman in December 2009 following a six-month investigation that included an outside examination by a law firm Allstate hired. The investigation revealed trading activity that could have cost certain pension funds as much as $91 million, while earning the security analysts bonuses of about $1.2 million. Court documents, however, noted Allstate’s analysis failed to account for other activity that offset much of those losses and all but wiped out the allegedly improperly boosted bonuses.
In February 2010, Allstate filed a public report, known as a 10-K, with the federal Securities and Exchange Commission about the alleged improper activity, and discussed the activity in a memo to company employees. The filing and memo did not name the security analysts individually.
According to Pierce’s opinion, Judge Sherlock’s dismissal held the plaintiffs couldn’t bring their main defamation claim because they weren’t named in those documents. Pierce wrote that Allstate acknowledged the contested statements could be actionable, but agreed with the company’s assertion the documents weren’t inherently defamatory because they could “be reasonably construed in a way that does not assert illegal or unethical behavior by former employees.”
On appeal, the plaintiffs argued the context surrounding the memo pointed to their identities enough to allow their defamation claim to survive. But the panel said the Illinois Supreme Court has repeatedly held that a defamation claim is not viable so long as an innocent construction is possible, or if a statement could be taken to be referring to someone who is not a plaintiff.
The plaintiffs further said Judge Sherlock improperly dismissed their remaining claims on the grounds the Seventh Circuit had already ruled on the same arguments, asserting that panel did so only on jurisdictional grounds, and not the merits. Pierce said the First District justices agreed with the plaintiffs, writing that the Seventh Circuit didn’t need to examine whether any prospective employers failed to hire the fired analysts because of Allstate’s memos and filings.
However, when the First District justices proceeded to review those claims directly, they agreed with Allstate’s contention the plaintiffs didn’t — and couldn’t — meet the pleading standards.
“They merely allege that they were damaged and that it is impossible for them to find work in their professional field,” Pierce wrote. “They do not allege any specific facts to support their general claim that they were damaged. They do not allege any specific facts to show that a prospective employer refused to hire them because of the alleged defamatory statements. They do not even allege any specific facts to show that they applied or interviewed for any specific positions that they did not get.”
In conclusion, Pierce said, the plaintiffs have had eight years to construct an argument in favor of the special damages needed to sustain their claims. So, he said, remanding the case to allow corrected pleadings “would not be an appropriate exercise of our judicial discretion.”
The panel affirmed the dismissal with prejudice.
The plaintiffs have been represented by attorneys Robert D. Sweeney, John J. Scharkey, Joanne H. Sweeney and Anna R. Bugan, of the firm of Sweeney, Scharkey & Blanchard, of Chicago.
Allstate has been represented by attorneys Gerard Pauling, Uma Chandrasekaran and Katelyn Miller, of the firm of Seyfarth Shaw LLC, and Anneliese Wermuth and Jenny Goltz, of Cozen & O’Connor, both of Chicago; and Rex Heinke and Jessica M Weisel, of Akin Gump Struss Hauer & Feld, of Los Angeles.