                                                                                           December 16 2008


                                             04-636

                     IN THE SUPREME COURT OF THE STATE OF MONTANA

                                           2008 MT 418




MARK ALAN DENKE, Personal Representative
of the Estate of Kathlyn N. Denke, Deceased,

              Petitioner and Appellant,

         v.

MAURICE SHOEMAKER, Councilman for the
City of Thompson Falls, CITY OF THOMPSON FALLS,
and the HUMAN RIGHTS COMMISSION
OF THE STATE OF MONTANA,

              Respondents and Appellees.



APPEAL FROM:           District Court of the Twentieth Judicial District,
                       In and For the County of Sanders, Cause No. DV 2002-042
                       Honorable C. B. McNeil, Presiding Judge


COUNSEL OF RECORD:

                For Appellant:

                       Ann L. Moderie, James A. Manley, Manley Law Firm, Polson, Montana

                For Appellees:

                       Ted Hess-Homeier, Attorney at Law, Missoula, Montana



                                                      Submitted on Briefs: February 16, 2005

                                                                 Decided: December 16, 2008


Filed:

                       __________________________________________
                                         Clerk
Justice James C. Nelson delivered the Opinion of the Court.

¶1     Kathy Denke, a former employee of the City of Thompson Falls, Montana, filed

two complaints with the Montana Department of Labor and Industry alleging that the

City and Maurice Shoemaker, a member of the Thompson Falls City Council, had

unlawfully retaliated against her. After a contested case hearing, the hearing examiner

awarded judgment against Denke on her claims against the City and partial judgment in

favor of Denke on her claims against Shoemaker. The Human Rights Commission

affirmed the examiner’s decision.

¶2     Denke then filed a petition for judicial review in the Twentieth Judicial District

Court, Sanders County. In the course of the proceedings, Shoemaker filed a bankruptcy

petition in the United States Bankruptcy Court for the District of Montana. As a result,

the District Court stayed the proceedings as they relate to Shoemaker. The proceedings

continued, however, with respect to the City; and the court ultimately denied Denke’s

petition on the same grounds relied on by the hearing examiner—namely, that the City is

immune from suit and is not liable for Shoemaker’s actionable retaliatory conduct.

¶3     Denke now appeals.1 Having considered the issues and arguments presented, we

hold that the District Court erred in its conclusions that the City is immune from suit and

that the City is not liable for Shoemaker’s actionable retaliatory conduct. We therefore

reverse the District Court’s order denying Denke’s petition for judicial review and

remand for further proceedings.

       1
        During the pendency of this appeal, Mark Alan Denke was substituted as
Personal Representative of the Estate of Kathlyn N. Denke, Deceased. However, the
references in this Opinion to “Denke” are to Kathy, not Mark.

                                            2
                                     BACKGROUND

¶4     As noted, the District Court did not rule on Denke’s petition for judicial review

insofar as it relates to Shoemaker. Thus, Denke’s claims against Shoemaker are not at

issue in this appeal. At the same time, however, Shoemaker’s actions and the hearing

examiner’s rulings with respect to those actions are intertwined with Denke’s claims

against the City, and they provide essential context for the issues addressed herein. For

that reason, the factual background of this case and the hearing examiner’s decision are

set forth below in comprehensive detail. But we express no view in this Opinion on the

merits of Denke’s petition for judicial review vis-à-vis Shoemaker, as that is a matter to

be addressed by the District Court in the first instance.

I.     The Events Leading up to Denke’s Instant Human Rights Complaint

¶5     Denke began working for the City of Thompson Falls in the early 1980s. At all

times pertinent to this case, her job title was “Town Clerk/Finance Officer.” The mayor

was her immediate supervisor, and her job duties included acting as city treasurer.

¶6     In 1998 and early 1999, the City hired a certified public accountant to examine the

City’s bookkeeping and records. The CPA identified several problems and recommended

procedures to improve the City’s financial recordkeeping. A number of City Council

members worked with Denke and the CPA to remedy the problems; and by the spring of

1999, the CPA reported that the books were in good order.           In addition, the City

authorized the CPA to implement the recommended procedural changes, for which the

CPA charged $50.00 per hour.




                                              3
¶7    As a member of the City Council, Shoemaker received the CPA’s report and

participated in the decision to authorize the CPA’s work. Yet, despite the explanations

provided by the CPA, Shoemaker (who had no accounting expertise) thought that Denke

was responsible for causing the City to incur the expense of implementing the new

recordkeeping procedures. He also believed that the City Council had tabled too many

agenda items, particularly involving reports about ongoing City business, and that Denke

was responsible for failing to provide completed reports and sufficient information to

address the items the City Council had tabled.

¶8    In August 1999, Denke filed a Human Rights complaint with the Department of

Labor and Industry alleging sexual harassment and retaliation by the mayor. In October

of that year, the City Council met in executive session, which was open to the public, and

agreed to settle this complaint and Denke’s companion federal complaint filed with the

Equal Employment Opportunity Commission. Shoemaker objected to the settlement on

several grounds. He questioned the merits of Denke’s claim, opining that it was filed in

response to criticisms of her job performance rather than legitimately inappropriate

treatment. He also expressed disagreement with the laws providing remedies for sexual

harassment, and he resented the notion of a state agency investigating the City’s conduct

and interfering with the City’s autonomy in resolving something that, in Shoemaker’s

view, was purely a local matter. Nevertheless, despite his objections, Shoemaker voted

to approve the settlement. The parties then submitted the settlement agreement to the

Human Rights Bureau of the Department of Labor and Industry for approval.




                                            4
¶9     As part of the proposed settlement, the parties agreed not to discuss its terms with

anyone. In addition, the mayor, the city attorney, and the members of the City Council

(including Shoemaker) signed a separate document, which stated:

              The undersigned acknowledge, pursuant to Montana Law, that they
       shall not discriminate against or retaliate against Kathy Denke, Town Clerk
       for the City of Thompson Falls, as a result of her filing a discrimination
       complaint against the City and it’s [sic] personnel.

¶10    In December 1999, Shoemaker received some questions and comments from

citizens concerning the settlement of Denke’s complaint. In addition, he heard a rumor

that the City had paid $15,000.00 to settle the case, though the terms of the settlement

agreement he had voted to approve did not include any such payment. Shoemaker felt

defensive as a result of the public comments and speculation, and he worried that his

constituents might blame him for an excessive settlement. Thus, he decided to respond

publicly. To that end, Shoemaker requested that the mayor put him on the agenda for the

next City Council meeting. The mayor did not do so.

¶11    Shoemaker then wrote a letter (dated January 6, 2000) to the local newspaper, the

Sanders County Ledger, in which he purported to tell “the rest of the story.” He noted

that the mayor had refused his request to be put on the agenda, and he stated that there

were “things going on at city hall that the public should know about.” He contended that

the Ledger’s editor and co-owner, Tom Eggensperger, who was also a member of the

City Council, never printed any “negative city business,” perhaps due to “some kind of

conflict of interest.” Of particular relevance to the case at hand, Shoemaker also asserted:

       The city had an audit in 1998 which shows there was poor bookkeeping at
       city hall. In fact it was so bad it is now costing the city $50.00 per hour to


                                             5
          get it corrected. This money was actually wasted, as the bookkeeping is
          already paid for. Maybe this is money that could have been used on city
          streets. This is your tax dollar.

                                             .   .   .

          And now to top everything off the city clerk filed sexual harassment
          charges against the Mayor and the city. This is why I wanted on the
          agenda, to talk about this with all parties present. I feel that as I represent
          the city that I have been accused of something that I had nothing to do with
          and should have a right to speak out publicly in my defense.

          So far I have heard a “He did” but I have not heard a “I did not.”

Shoemaker called for the mayor’s “immediate resignation” and also suggested that “the

Clerk [i.e., Denke] should take a long hard look and also resign.” He signed the letter:

“Maurice Shoemaker, Council Person Ward #1.”

¶12       Eggensperger printed Shoemaker’s letter, except for the three paragraphs quoted

above, and attributed it to “Maurice Shoemaker, Councilperson Ward 1, Thompson

Falls.”      Eggensperger also printed a response to Shoemaker’s conflict-of-interest

allegations, as well as the following explanation for not printing Shoemaker’s letter in its

entirety: “Mr. Shoemaker’s letter was edited considerably as we felt he made accusations

that were either unfair, unsubstantiated, a misrepresentation of the facts or inappropriate

given his position on the council.”

¶13       Unhappy about the editorial comments and deletions, Shoemaker made copies of

his original letter available to citizens. He also read the deleted paragraphs to persons

who called him and inquired about the letter and editorial comments. Then, on January

19, 2000, Shoemaker wrote a second letter to the Ledger. He accused Eggensperger

again of “biased” reporting and having a conflict of interest. He repeated his complaint


                                                 6
about not being put on the agenda and insinuated that the mayor may have “something to

hide.” He also articulated the following “REASON I WANTED ON THE AGENDA”:

      The city clerk filed a sexual harassment charge against the MAYOR and
      the city. At this time has there been a settlement or a pay off? If so whow
      [sic] and how much? Who got the money, the clerk and the MAYOR or
      what happened? I do not know as nothing has been told to me. Some one
      seems to want to sweep this under the carpet and not let the public know
      about it.

      It is for this reason that I believe the MAYOR should resign.

      It is for this and various other reasons that I believe that the clerk should
      also resign.

Shoemaker noted that he was “writing this as a concerned citizen of Thompson Falls.”

¶14   It does not appear that Shoemaker’s second letter was published in the Ledger, but

he did provide copies of the letter to a number of citizens, including Laurie Brass. On or

about January 24, 2000, Brass and others who had learned of Shoemaker’s actions and

views started circulating petitions calling for the mayor to place Shoemaker on the

agenda for the February 14 council meeting “to talk about the sexual harassment charges

filed against the mayor and the city by the city clerk.” A copy of one of the petitions,

which is included in the record, contains twenty signatures and refers to a “second page.”

¶15   Denke received hostile comments in person and by telephone as a result of

Shoemaker’s letters and the petitions. Meanwhile, Shoemaker learned on January 27 that

the Human Rights Bureau had approved the settlement that the City Council (including

Shoemaker) had reviewed and agreed to in October 1999. However, Shoemaker did not

convey this information to the people who were circulating the petitions.




                                            7
¶16    The first item on the agenda for the February 14, 2000 council meeting was titled

“Human Rights Complaint -- Maurice Shoemaker/Laurie Brass.” Due to the size of the

anticipated crowd, the meeting convened at the Community Center building, which has a

meeting room substantially larger than the City Council chambers. Approximately 75

people attended, including Denke, who feared that her absence would aggravate the

situation and further jeopardize her reputation and her job.

¶17    At the commencement of the meeting, the mayor, who normally presided over

council meetings, resigned and walked out. As a result, Linda McKahan, who was the

senior council member present, assumed the duty of chairing the meeting. As described

below, the discussion related to Denke’s Human Rights complaint was prolonged, and

much of the citizen participation at the meeting pertained to this subject. McKahan, who

was not experienced in chairing a council meeting of this nature, did not know how

appropriately to limit the discussion; so, she did not.

¶18    Shoemaker began with lengthy remarks about the Ledger’s alleged censorship and

the mayor’s refusal to put him on the previous agenda. He then discussed the rumors

regarding the amount of the settlement of Denke’s complaint, which were inconsistent

with his understanding of the settlement agreement, and the absence of any confirmation

during a council meeting that the settlement had been accepted. Shoemaker suggested

repeatedly that council members were “sweeping it under the rug” and “keeping it behind

closed doors.” He commented that he had not heard an apology to date from either the

mayor or Denke. He told the assembly that Denke had agreed with his account of what




                                              8
happened between her and the mayor; however, when he turned to Denke and asked her

to acknowledge her supposed agreement with him, Denke refused.

¶19    Following Shoemaker’s remarks, numerous citizens, members of the council, and

the city attorney spoke in a free-ranging discussion. In addition, Brass began circulating

copies of documents she had obtained from the Human Rights Bureau’s investigative file.

The city attorney and some council members pointed out that the settlement agreement

contained a confidentiality clause; but Shoemaker argued that because the October 1999

session (during which the council discussed the proposed settlement) had been open to

the public, the matter was open for discussion at the present meeting.

¶20    Many of the citizen comments during the meeting were not per se attacks on

Denke, but rather were critical and suspicious of how council and government business

was conducted. Some citizens, however, did make comments suggesting that Denke had

been a willing participant in the sexual harassment, while others insinuated or directly

asserted that Denke had voluntarily engaged in sexual activity with the mayor at work

during working hours. When the discussion lagged, council members asked if there were

any other comments, prefatory to closing the discussion and moving on to the next

agenda item. That inquiry repeatedly prompted additional comments.

¶21    Denke attended the entire council meeting, seated prominently in front of the

crowd. Her attendance was not mandatory; but, as noted, she anticipated that there would

be discussion regarding her Human Rights complaint and the settlement, and she did not

want to be conspicuously absent. Subsequently, the Missoulian newspaper printed an

extensive article reporting on the meeting and the public comments that had been made


                                             9
during it.   Radio stations in western Montana and as far away as Great Falls also

broadcast reports about the meeting.

II.    Denke’s Instant Human Rights Complaint, and the Final Agency Decision

¶22    On March 3, 2000, Denke filed two Human Rights complaints with the Montana

Department of Labor and Industry, alleging that Shoemaker and the City had unlawfully

retaliated against her for filing and prosecuting her 1999 sexual harassment and

retaliation claims. The Department consolidated the two complaints.

¶23    Regarding Shoemaker, Denke alleged that the following actions were retaliatory:

publishing or causing to be published false public statements about her job performance,

the 1999 Human Rights complaint, and the settlement of that complaint; making public

references to the settlement, contrary to the confidentiality provision in the settlement

agreement; publicly calling for her resignation; circulating or encouraging the circulation

of petitions to place Shoemaker on the February 14 council meeting agenda to discuss the

complaint and the settlement; causing the mayor to place him on the agenda to discuss

these matters; falsely stating that he did not know the terms of the settlement; stating at

the February 14 council meeting that he had not yet heard an apology from Denke for her

complaint; and making, soliciting, encouraging, or failing to limit false, defamatory,

humiliating, and abusive comments to and about Denke during the council meeting.

¶24    As for the City, Denke alleged that the City, through the City Council, retaliated

against her by making, soliciting, encouraging, or failing to limit false, defamatory,

humiliating, and abusive comments to and about Denke during the February 14 council

meeting. Denke also alleged that the City was liable for Shoemaker’s unlawful actions.


                                            10
¶25    Denke’s complaint proceeded to a two-day contested case hearing in December

2000. Thereafter, on November 16, 2001, the hearing examiner entered a Final Agency

Decision, which included detailed findings of fact, a legal opinion as to Shoemaker’s and

the City’s respective liability, and a determination as to the amount of Denke’s damages.

¶26    With regard to Shoemaker’s January 6 letter, the examiner found as follows.

Shoemaker had no informed source reporting that the bookkeeping problems in 1998

were Denke’s fault; and while he believed Denke was responsible for those problems,

Shoemaker “personally could not tell an asset from an angle iron under generally

accepted accounting principles.” Shoemaker also had no information to contradict the

CPA’s 1999 report that the City’s books were in good order. Furthermore, Shoemaker’s

assertion that it was Denke’s fault the City had to spend $50.00 per hour for the CPA to

make changes in accounting procedures was made “with reckless disregard for the truth

or falsity of the statement.” Shoemaker included this statement in his letter in furtherance

of his goal of getting on the council meeting agenda to discuss Denke’s Human Rights

complaint and because he disapproved of Denke for filing that complaint. According to

the examiner, Shoemaker took this action “with retaliatory animus toward Denke.”

¶27    As for the January 19 letter, the examiner entered the following findings. At the

time he wrote this letter, Shoemaker knew the terms of the settlement, knew exactly who

would receive money under the settlement, knew how much money was contemplated by

the settlement, and knew or reasonably should have known that the settlement submitted

to the Human Rights Bureau was exactly the settlement he had voted for. Furthermore,

he wrote the letter, with the false statements it contained about his knowledge of the


                                            11
settlement, because he wanted a chance to tell citizens during a council meeting that the

City had not made a $15,000.00 settlement payment and to repeat his objections to sexual

harassment liability law. The examiner found that Shoemaker’s question about who

received the settlement money contained a “deliberate suggestion” that Denke and the

mayor had colluded to obtain a settlement from the City based on a meritless sexual

harassment claim and then had split the proceeds. Shoemaker, however, had no factual

basis for these insinuations; indeed, he made the statements “with knowledge of their

provably false connotations.” In short, Shoemaker wrote the letter in furtherance of his

goal of getting on the council meeting agenda to discuss Denke’s Human Rights

complaint and the settlement, and he took this action “with retaliatory animus toward

Denke.”

¶28   The hearing examiner entered a number of findings concerning injuries suffered

by Denke. In particular, before attending the February 14 council meeting, she suffered

severe emotional distress upon learning of the publication of Shoemaker’s letters and

receiving hostile comments in the community triggered by those publications. As a result

of the meeting and the associated publicity, she suffered physical, emotional, and mental

harm, which in turn caused her to miss a substantial number of work days and wages for

those days. She required hospitalization for suicidal ideation and inability to function.

Her ability to cope with her physical and emotional problems and the stresses of everyday

life was “seriously compromised.” The examiner found that although much of the harm

suffered by Denke resulted from the council meeting and the associated publicity, she

suffered discrete severe emotional distress because of Shoemaker’s letters—specifically,


                                           12
his assertion that it was her fault the City had to spend $50.00 per hour for the CPA to

implement changes in accounting procedures, and his insinuation that she and the mayor

had colluded to obtain payment in settlement of a meritless sexual harassment claim.

¶29    Turning to the legal issues, the hearing examiner first determined that Denke had

established a prima facie case of unlawful retaliation by both the City and Shoemaker.

Specifically, she proved that she had engaged in an activity protected by the Human

Rights Act—namely, filing and prosecuting her 1999 Human Rights complaint—and that

Shoemaker and the City had subjected her to “significant adverse acts,” including

“coercion, intimidation and harassment.” Moreover, because these adverse acts occurred

while Denke’s complaint was pending or within six months after its resolution, the

examiner observed that Denke was entitled to a “disputable presumption of retaliatory

motive.” In addition, the examiner noted that Denke had presented direct evidence of

Shoemaker’s retaliatory motive—e.g., his efforts to get on the agenda to discuss the

settlement of her complaint, his letters in which he wrote about the complaint and its

merits, his criticisms of her job performance, his suggestion that she resign, and his

discussion of these matters at the council meeting. This direct evidence, along with the

disputable presumption, satisfied the requirement of a “causal connection” between the

adverse acts and the protected activity.

¶30    The hearing examiner then considered several affirmative defenses asserted by

Shoemaker and the City: privilege under § 27-1-804, MCA; legislative immunity under

§ 2-9-111, MCA; and the constitutional right to free speech. At the outset, the examiner

observed that the significant adverse acts established by Denke consisted of or related to


                                           13
speech. The examiner thus characterized this case as involving a “conflict” between the

right to free speech on one hand and the right to be free from illegal retaliation on the

other. Noting that “there is little to no current Montana law defining the interaction

between the Human Rights Act’s prohibition against retaliation and these affirmative

defenses,” the examiner proceeded on the premise that “privileged, immune or

constitutionally protected communications cannot be retaliatory.”

¶31    Concerning Shoemaker’s comments at the February 14 council meeting, the

examiner decided that § 27-1-804(2), MCA, applied. This provision includes within the

definition of “privileged publication” one that is made “in any legislative or judicial

proceeding or in any other official proceeding authorized by law.” Section 27-1-804(2),

MCA. As to Shoemaker’s letters, the examiner determined as follows: the statutory

privilege did not apply because the letters were not published “in the proper discharge of

an official duty” or “in any legislative or judicial proceeding or in any other official

proceeding authorized by law,” § 27-1-804(1), (2), MCA; statutory immunity did not

apply because publishing the letters did not constitute “the lawful discharge of an official

duty associated with legislative acts of the legislative body,” § 2-9-111(3), MCA; but the

constitutional free speech protections articulated in New York Times Co. v. Sullivan, 376

U.S. 254, 84 S. Ct. 710 (1964), and its progeny did apply, except to the statements made

with reckless disregard for their truth or falsity in the January 6 letter that Denke had

engaged in poor bookkeeping and thus caused the City to spend $50.00 per hour for a

CPA to correct the problem, and except to the provably false suggestion in the January 19

letter that Denke had colluded with the mayor to obtain payment from the City to settle a


                                            14
meritless sexual harassment claim. The examiner concluded that Shoemaker had illegally

retaliated against Denke when he circulated these statements and innuendos in his letters,

and the examiner awarded Denke $7,500.00 to rectify the severe emotional distress she

had suffered as a result of Shoemaker’s illegal discriminatory actions. The examiner also

imposed injunctive relief pursuant to § 49-2-506(1), MCA.

¶32    As for the City, the examiner determined that the comments made during the

February 14 council meeting related to Denke’s job performance and her Human Rights

complaint were privileged under § 27-1-804(2), MCA, and that the City, therefore, could

not be held liable for those comments. The examiner further determined, though with no

supporting analysis, that “[t]here is neither law nor fact upon which to base a ruling that

the city was responsible for Shoemaker’s acts in writing the letters.” The examiner thus

concluded that “the city is not responsible for his retaliatory conduct.”

¶33    Lastly, as to the “regulation” of the council meeting, the examiner first observed

that “Shoemaker and some of his supporters made comments that confirmed they viewed

sexual harassment as an improper subject for government regulation,” and “some of the

comments were premised upon the theory that any victim of sexual harassment was

responsible for the harassment by encouraging or colluding in the inappropriate sexual

overtures or behavior of the harasser.” But, the examiner reasoned, however “repugnant”

such comments may be, “disagreement with the law is an appropriate subject for

comment during a city council meeting regarding settlement of a claim under that law.”

Furthermore, the examiner opined that while “the council could have limited these

comments, in terms of time or topic,” “whether and how to limit comment during a


                                             15
council meeting is a legislative act.” Thus, the examiner decided that the conduct of

McKahan, the other council members, and the city attorney in allowing an unlimited

public discussion of the Denke-related agenda item during the February 14 council

meeting “consisted of the discharge of official duties associated with the council’s

legislative acts,” for which the City is immune from suit under § 2-9-111, MCA.

¶34    In short, the hearing examiner ruled that the City “did not illegally retaliate against

Denke, since its actions complained of were protected speech or immune legislative

acts,” and the City “was not responsible for Shoemaker’s illegal retaliation.”           The

examiner accordingly dismissed Denke’s charges of discrimination against the City.

¶35    Denke then appealed to the Human Rights Commission (“HRC”) the denial of her

claim that Shoemaker and the City had retaliated against her during the February 14

council meeting and the denial of her claim that the City was liable for Shoemaker’s

unlawful retaliatory actions. The HRC affirmed the hearing examiner’s Final Agency

Decision in all respects. We note, in addition, that Shoemaker filed a cross-appeal in the

HRC, which the HRC dismissed on procedural grounds. We affirmed that dismissal in

Shoemaker v. Denke, 2004 MT 11, 319 Mont. 238, 84 P.3d 4.

III.   Denke’s Petition for Judicial Review, and the District Court’s Decision

¶36    Pursuant to § 2-4-702, MCA, Denke filed a petition for judicial review in the

District Court on May 23, 2002. Shoemaker filed a Chapter 13 bankruptcy petition in the

United States Bankruptcy Court for the District of Montana in February 2003, and the

District Court accordingly stayed the proceedings on Denke’s petition insofar as it relates

to Shoemaker. Thus, we do not address Denke’s claims against Shoemaker. As for her


                                             16
claims against the City, Denke contended that the HRC erred in two respects: first, in its

conclusion that the City is immune from suit for its allegedly retaliatory conduct, and

second, in its conclusion that the City is not liable for the acts Shoemaker performed

within the scope of his employment or agency.

¶37    The District Court disagreed with Denke’s contentions. The court observed that

§ 2-9-111, MCA, grants governmental entities immunity for legislative acts, and the court

decided that “the conducting of a city council meeting by the city is a legislative act.”

Next, the court concluded that under § 27-1-804, MCA, the City is not liable for the

comments made by persons at the February 14 council meeting. The court also cited

§ 27-1-804, MCA, for the proposition that the City is not liable for Shoemaker’s letters,

though this contradicts the determination by the hearing examiner and the HRC that the

statutory privilege does not apply to Shoemaker’s letters. Lastly, the court held that

Shoemaker “was not acting within the scope of his duties as a councilperson when he

wrote the defamatory letters to the editors” and that the City, therefore, was not liable for

this conduct. The court accordingly denied Denke’s petition for judicial review insofar as

it applies to the City of Thompson Falls. Denke now appeals.

                                          ISSUES

¶38    Denke raises the following issues on appeal:

       1. Is the City immune from suit on Denke’s retaliation claim against it?

       2. Is the District Court’s order denying Denke’s petition for judicial review

overbroad?

       3. Is the City liable for Shoemaker’s actionable retaliatory conduct?


                                             17
                             STANDARDS OF REVIEW

¶39   The standards for reviewing a final decision of the HRC are whether the agency’s

findings of fact are clearly erroneous and whether the agency’s interpretation and

application of law are correct. Section 2-4-704(2)(a), MCA; CEnTech Corp. v. Sprow,

2006 MT 27, ¶ 20, 331 Mont. 98, ¶ 20, 128 P.3d 1036, ¶ 20; O’Neill v. Dept. of Revenue,

2002 MT 130, ¶ 10, 310 Mont. 148, ¶ 10, 49 P.3d 43, ¶ 10. A factual finding is clearly

erroneous if it is not supported by substantial evidence in the record, if the fact-finder

misapprehended the effect of the evidence, or if a review of the record leaves the court

with a definite and firm conviction that a mistake has been made. See Benjamin v.

Anderson, 2005 MT 123, ¶ 31, 327 Mont. 173, ¶ 31, 112 P.3d 1039, ¶ 31; In re Montana

All-Alcoholic Beverages Resort License, 2008 MT 165, ¶ 26, 343 Mont. 331, ¶ 26, 184

P.3d 324, ¶ 26. This Court employs these same standards when reviewing the district

court’s order affirming or reversing the HRC’s decision. CEnTech, ¶ 20; O’Neill, ¶ 10.

                                     DISCUSSION

¶40   Issue 1. Is the City immune from suit on Denke’s retaliation claim against it?

I.    Clarification of the Issue

¶41   Denke filed the instant Human Rights action claiming that the City had unlawfully

retaliated against her in the way it “regulated” the February 14 council meeting. Denke’s

theory is that “moving the meeting place to accommodate the expected large crowd and

allowing unlimited discussion . . . of Denke’s sexual harassment complaint, that included

personal attacks on Denke,” constituted unlawful retaliation. She points out, based on

testimony at the contested case hearing, that the City Council imposed limits on


                                           18
discussions at other council meetings. In one particular instance, the City Council was

considering a complaint against a law enforcement officer, and the mayor limited the

speakers’ comments to what they personally knew (as opposed to hearsay). In another

instance, in order to receive as many comments from the public as possible concerning a

water issue, a time limit of three minutes per speaker was imposed. In Denke’s view, the

City treated her differently by not imposing these same sorts of limitations on the

discussion at the February 14 council meeting and by “actually encourag[ing] further,

unlimited comment.” The City did so, according to Denke, in retaliation for her filing

and prosecuting her 1999 Human Rights complaint.

¶42   As noted in the background discussion above, the hearing examiner did not reach

the question of whether the manner in which the City conducted the council meeting

constituted unlawful retaliation. The examiner did determine that (1) “Denke presented

evidence that . . . the city subjected her to coercion, intimidation and harassment” and

(2) “All of the conduct at issue in this case occurred while Denke’s prior complaint

against the city was pending or within six months after its resolution. Thus, she is

entitled to the disputable presumption of retaliatory motive.” However, the examiner did

not address whether the City had overcome this presumption. Rather, the examiner

reasoned that (1) “the council could have limited [comments made during the meeting],

in terms of time or topic,” but (2) “whether and how to limit comment during a council

meeting is a legislative act.” The examiner concluded that for such legislative acts, the

City is immune from suit under § 2-9-111, MCA, and, having reached this conclusion,




                                           19
decided that “no further analysis is necessary” regarding the manner in which the City

conducted the meeting.

¶43    In short, the hearing examiner essentially concluded that whether or not the City’s

challenged conduct was unlawful under the Human Rights Act, the City is immune from

suit for that conduct and Denke’s retaliation claim, therefore, must be dismissed. The

HRC and the District Court both affirmed this conclusion based on the same rationale.

Thus, in light of this procedural posture of the case, the question of whether the City’s

conduct of the council meeting actually amounted to unlawful retaliation is not before us,

and we accordingly express no view on that question. Rather, the specific issue here is

whether the examiner (and the HRC and the District Court) erred in determining that

decisions regarding how to conduct a city council meeting are, in all instances,

“legislative acts” for which the City is immune under § 2-9-111, MCA.

¶44    Denke contends that the hearing examiner erred in applying § 2-9-111, MCA, to

the case at hand. She points out that in Dagel v. City of Great Falls, 250 Mont. 224, 819

P.2d 186 (1991), this Court held that “harassment by a supervisor” is not a “legislative

act” under § 2-9-111, MCA. See Dagel, 250 Mont. at 233, 819 P.2d at 191. Denke

argues that “[j]ust as harassment is not considered a ‘legislative act’ under the statute,

neither should retaliation be so considered.” In addition, relying in large part on Bechard

v. Rappold, 287 F.3d 827 (9th Cir. 2002), Denke argues that “the City’s regulation of the

meeting was more administrative in nature than legislative.” See § 2-9-111(1)(c)(ii),

MCA (stating that “the term legislative act does not include administrative actions

undertaken in the execution of a law or public policy”).


                                            20
¶45    The City disagrees and, also relying on Bechard, presents an argument that “the

decision to use a larger building to accommodate greater attendance and the decision to

allow and not restrict public comment” were immune legislative acts. Wholly aside from

this immunity argument, however, the City also renews its free speech and statutory

privilege defenses.    Specifically, the City argues that i t cannot be held liable for

statements made during the February 14 council meeting because those statements were

privileged under § 27-1-804, MCA, and were protected by the constitutional free speech

principles articulated in New York Times Co. v. Sullivan, 376 U.S. 254, 84 S. Ct. 710

(1964). Along these same lines, the City also contends that it could not lawfully have

regulated what was said at the meeting.         These arguments appear to be offered as

alternative grounds for concluding that the City cannot be held liable to Denke for its

conduct of the meeting and, therefore, for upholding the District Court’s order denying

her petition for judicial review. See e.g. Peterson v. Eichhorn, 2008 MT 250, ¶ 21, 344

Mont. 540, ¶ 21, 189 P.3d 615, ¶ 21 (“We uphold a district court’s judgment if the court

reaches the correct result, regardless of the court’s reasoning.”).

¶46    For the reasons which follow, we agree with Denke that the hearing examiner, the

HRC, and the District Court erred in their respective applications of § 2-9-111, MCA, to

the case at hand. Furthermore, we conclude that the City’s reliance on § 27-1-804, MCA,

and New York Times is misplaced. However, we do agree, in part, with the City’s

argument that it could not lawfully have regulated what was said at the council meeting.

Because our partial agreement with the City’s regulation argument may limit Denke’s

entitlement to relief, it is useful to address that argument first, followed by a discussion of


                                              21
the immunity issue. Lastly, we address the City’s alternative theories based on statutory

privilege and New York Times.

II.    The City’s Regulation Argument

¶47    The City contends that there are “legal limits” on the City Council’s “ability to

restrict speech” at a council meeting. We agree. “It is axiomatic that the government

may not regulate speech based on its substantive content or the message it conveys.”

Rosenberger v. Rector and Visitors of the Univ. of Virginia, 515 U.S. 819, 828, 115 S. Ct.

2510, 2516 (1995). Nor may government, in the realm of private speech or expression,

favor one speaker over another. Rosenberger, 515 U.S. at 828, 115 S. Ct. at 2516.

Indeed, viewpoint discrimination is “an egregious form of content discrimination,” and

the government “must abstain from regulating speech when the specific motivating

ideology or the opinion or perspective of the speaker is the rationale for the restriction.”

Rosenberger, 515 U.S. at 829, 115 S. Ct. at 2516. These well-settled principles are

mandated not only by the First Amendment to the United States Constitution, but also by

Article II, Section 7 of the Montana Constitution.

¶48    It follows from these principles that when the government opens a forum for

discussion of certain subject matter, it may not impose restrictions that discriminate

among viewpoints on that subject. See Dorn v. Board of Trustees, 203 Mont. 136, 146,

661 P.2d 426, 431 (1983); Rosenberger, 515 U.S. at 829, 115 S. Ct. at 2516; Perry Educ.

Ass’n v. Perry Local Educators’ Ass’n, 460 U.S. 37, 61, 103 S. Ct. 948, 964 (1983)

(Brennan, Marshall, Powell, & Stevens, JJ., dissenting).       Accordingly, to the extent

Denke complains that the City Council should have regulated or otherwise controlled the


                                            22
particular viewpoints expressed by speakers related to her 1999 Human Rights complaint

during the February 14 council meeting, her claim must fail. See City of Madison, Joint

School Dist. No. 8 v. Wisconsin Employment Relations Commission, 429 U.S. 167, 176,

97 S. Ct. 421, 426 (1976) (“Whatever its duties as an employer, when the board sits in

public meetings to conduct public business and hear the views of citizens, it may not be

required to discriminate between speakers on the basis of . . . the content of their

speech.”).

¶49    We do not agree, however, with the City’s suggestion that it is powerless to

impose any restrictions at all on discussions at council meetings. For one thing, the

hearing examiner stated that “the council could have limited [comments made during the

meeting], in terms of time or topic,” and the City has neither cross-appealed from nor

challenged this portion of the examiner’s decision at any point during the course of this

litigation. Moreover, while the City argues at some length that content-based restrictions

on speech are not permitted, the City concedes in a footnote that “reasonable time and

place restrictions are probably permitted.”

¶50    In any event, the law in this area is well-settled, and it clearly supports the hearing

examiner’s statement. Time, place, and manner restrictions that preserve a city council’s

legitimate interest in conducting efficient and orderly meetings are permissible, so long

as the restrictions are reasonable and viewpoint neutral. See e.g. City of Madison, 429

U.S. at 175 n. 8, 97 S. Ct. at 426 n. 8 (speech may be confined to the specified topic at

hand); White v. City of Norwalk, 900 F.2d 1421, 1425 (9th Cir. 1990) (same); Rowe v.

City of Cocoa, 358 F.3d 800, 803 (11th Cir. 2004) (same); Wright v. Anthony, 733 F.2d


                                              23
575, 577 (8th Cir. 1984) (upholding a five-minute limit on each speaker); Kindt v. Santa

Monica Rent Control Bd., 67 F.3d 266, 271 (9th Cir. 1995) (three-minute limit); Shero v.

City of Grove, 510 F.3d 1196, 1203 (10th Cir. 2007) (three-minute limit); Jones v.

Heyman, 888 F.2d 1328, 1329, 1333 (11th Cir. 1989) (holding that a truculent speaker

may be restricted or even removed); Eichenlaub v. Township of Indiana, 385 F.3d 274,

281 (3d Cir. 2004) (same).

¶51    While we conclude that reasonable and viewpoint-neutral limitations on speech at

a council meeting may be imposed, we by no means retreat from “ ‘the principle that

debate on public issues should be uninhibited, robust, and wide-open, and that it may

well include vehement, caustic, and sometimes unpleasantly sharp attacks on government

and public officials.’ ” Skinner v. Pistoria, 194 Mont. 257, 261, 633 P.2d 672, 674-75

(1981) (quoting New York Times, 376 U.S. at 270, 84 S. Ct. at 721). As we stated in

Skinner, “[t]he concern which all citizens have in the proper conduct of public affairs by

public officials requires that there be wide freedom to criticize that conduct, even though

the criticism be unjustified or extravagant.” Skinner, 194 Mont. at 262, 633 P.2d at 675.

We reaffirm these views. At the same time, however, we conclude that imposition of

reasonable and viewpoint-neutral time, place, and manner restrictions at a city council

meeting will not unduly hamper debate on public issues or criticism of the conduct of

public affairs.

¶52    In sum, we agree with the City that it could not lawfully have regulated the

particular viewpoints expressed by speakers related to Denke’s 1999 Human Rights

complaint during the February 14 council meeting. We also conclude that the City may


                                            24
impose reasonable and viewpoint-neutral time, place, and manner restrictions on speech

for the purpose of conducting its council meetings in an efficient and orderly manner. In

so holding, we caution that failing to impose such restrictions does not necessarily

constitute unlawful retaliation.    That question depends on the laws defining and

prohibiting unlawful retaliation; and with respect to the February 14 council meeting, the

hearing examiner must complete the retaliation analysis in the first instance on remand.

III.   The Immunity Issue

¶53    We next address whether the City is immune from suit for its conduct of the

council meeting with regard to the Denke-related agenda item. Given our holding above

in Section II, the City could not have regulated the particular viewpoints expressed by

speakers on this topic, but it could have imposed reasonable and viewpoint-neutral time,

place, and manner restrictions on the discussion. Accordingly, the immunity issue here

relates only to Denke’s complaint that the City failed to impose such restrictions.

¶54    Montana’s 1972 Constitution abolishes the common-law doctrine of sovereign

immunity from suit. See Mont. Const. art, II, § 18; Silvestrone v. Park County, 2007 MT

261, ¶ 12, 339 Mont. 299, ¶ 12, 170 P.3d 950, ¶ 12. At the same time, however, the

Constitution provides that immunity may be established by specific provision enacted by

a supermajority of both houses of the Legislature. Specifically, Article II, Section 18

states: “The state, counties, cities, towns, and all other local governmental entities shall

have no immunity from suit for injury to a person or property, except as may be

specifically provided by law by a 2/3 vote of each house of the legislature.” Thus,

governmental immunity exists in this state only as provided by statutes enacted by a two-


                                            25
thirds vote of both houses. See e.g. Whiting v. State, 248 Mont. 207, 221-22, 810 P.2d

1177, 1186 (1991). Section 2-9-111, MCA, is such a statute. Likewise, although not

addressed by the hearing examiner, the HRC, or the District Court, the City also cites

§ 2-9-114, MCA, which was enacted pursuant to Article II, Section 18’s exception.

These provisions establish governmental immunity from suit for the acts and omissions

enumerated therein.

¶55    Application of the sovereign immunity defense does not mean that there is an

absence of duty to the plaintiff; rather, where the immunity defense exists, the breach of

duty is simply not actionable against the sovereign. Orr v. State, 2004 MT 354, ¶ 55, 324

Mont. 391, ¶ 55, 106 P.3d 100, ¶ 55. Thus, although the government may fail in its duty

or obligation to the plaintiff, it is not subject to suit for such conduct if the conduct falls

within the statutory grant of immunity. Perhaps recognizing the severity of this result, we

have said that “it is ‘our duty to strictly construe any attempted governmental immunity --

that is, every act expanding statutory immunity must be clearly expressed.’ ” Mitchell v.

Univ. of Montana, 240 Mont. 261, 265, 783 P.2d 1337, 1339-40 (1989) (quoting B.M. v.

State, 200 Mont. 58, 62, 649 P.2d 425, 427 (1982)). Consistent therewith, our approach

has been to limit governmental immunity to that which is granted by the plain wording of

the immunity statutes. See e.g. Mitchell, 240 Mont. at 263-65, 783 P.2d at 1339-40;

Montana Vending, Inc. v. Coca-Cola Bottling Co., 2003 MT 282, ¶¶ 17-18, 318 Mont. 1,

¶¶ 17-18, 78 P.3d 499, ¶¶ 17-18. Accordingly, in the case at hand, we must strictly

construe the grants of immunity in §§ 2-9-111 and -114, MCA, in determining whether

they include the conduct alleged to give rise to Denke’s claim.


                                              26
¶56    Section 2-9-111(2), MCA, provides that “[a] governmental entity is immune from

suit for a legislative act or omission by its legislative body, or any member or staff of the

legislative body, engaged in legislative acts.” The term “governmental entity” includes

municipalities. Section 2-9-111(1)(a), MCA. Furthermore, the term “legislative act,” as

applicable in the case at hand, means “actions by a legislative body that result in creation

of law or declaration of public policy.” Section 2-9-111(1)(c)(i)(A), MCA. The hearing

examiner opined that “whether and how to limit comment during a council meeting is a

legislative act.” Similarly, the District Court expressed the view that “the conducting of a

city council meeting by the city is a legislative act.” These statements are correct in the

sense that conducting a city council meeting and placing (or failing to place) limits on the

discussion of a particular agenda item at the meeting are actions taken by a legislative

body. However, such actions here, which did not “result in creation of law or declaration

of public policy,” do not fall within the plain wording of the term “legislative act” as

defined in § 2-9-111(1)(c)(i)(A), MCA. Accordingly, strictly construing the grant of

governmental immunity as provided by the plain wording of this statute, we hold that the

City’s conduct of the discussion of the Denke-related agenda item is not encompassed

within that statutory grant.

¶57    Section 2-9-114, MCA, provides that “[a] local governmental entity and the

elected executive officer thereof are immune from suit for damages arising from the

lawful discharge of an official duty associated with vetoing or approving ordinances or

other legislative acts or in calling sessions of the legislative body.” Here, there were no

ordinances under consideration during the discussion of the Denke-related agenda item,


                                             27
and neither that discussion nor the regulation thereof involved legislative acts. However,

the statute grants immunity for the lawful discharge of an official duty “in calling

sessions of the legislative body.” Although Denke’s claim appears to rest on the manner

in which the council meeting was conducted, for which the City is not immune from suit

under § 2-9-114, MCA, we note that to the extent Denke’s claim rests on the “calling” of

the meeting itself, the City is immune under § 2-9-114, MCA, for that particular act.

¶58    Given the foregoing conclusions, we need not address the parties’ dispute over

whether decisions regarding how to conduct the February 14 council meeting were

“legislative acts” under the test articulated in Bechard. We hold that the City cannot

prevail in asserting either § 2-9-111, MCA, or § 2-9-114, MCA, as a defense to Denke’s

claim of unlawful retaliation based on the City’s conduct of the discussion of the Denke-

related agenda item at the council meeting. We accordingly reverse the District Court’s

determination that the City is immune from suit.

IV.    The City’s Statutory Privilege and New York Times Arguments

¶59    The City contends that the statements made at the February 14 council meeting

were privileged and constitutionally protected and that the City, therefore, cannot be held

liable for those statements. In this connection, the City relies on Skinner v. Pistoria, 194

Mont. 257, 633 P.2d 672 (1981), the statutory privilege contained in § 27-1-804, MCA,

and New York Times Co. v. Sullivan, 376 U.S. 254, 84 S. Ct. 710 (1964).

¶60    Skinner was a defamation action that arose out of statements made by Pistoria at a

meeting of the Great Falls City Commission during the time reserved for public

comment. Pistoria’s statements included an accusation that Skinner and other police


                                            28
officers had misused police department funds. Skinner claimed that these statements

were made with a malicious personal motive and that they exposed him to hatred,

contempt, ridicule, and obloquy, caused him to be shunned and avoided, and injured him

in his occupation. See Skinner, 194 Mont. at 259-61, 633 P.2d at 673-74. This Court

held, however, that § 27-1-804(2), MCA, confers an absolute privilege on publications

made in an “official proceeding authorized by law,” so long as the publications are made

“to the proper authorities responsible for the interest being expressed.” Skinner, 194

Mont. at 263, 633 P.2d at 676. Thus, if Pistoria’s statements about the conduct of certain

police officers were made at a proper proceeding, then the question of whether the

statements were maliciously motivated was irrelevant. Skinner, 194 Mont. at 263, 633

P.2d at 676. We concluded that the absolute privilege applied to Pistoria’s statements for

the following reasons: the meeting was an official meeting authorized by law; it was

proper for Pistoria to address the commission because it was the governing body of the

city; it was proper for him to address the city manager because the manager supervises

the police department; and it was proper for him to address the chief of police because the

police chief supervises all city police officers. Skinner, 194 Mont. at 264, 633 P.2d at

676.

¶61    The City contends that the similarity between Skinner and the case at hand is

“startling” and that Skinner “glaringly” supports the conclusion that the statements and

comments made at the February 14 council meeting were privileged. The City also cites

New York Times for the proposition that “our free citizenry has the right to criticize its

public officials,” even with “obnoxious comments.” The City avers that the New York


                                            29
Times decision disdains any attempts “to stifle critique of public officials” and that

speech is constitutionally protected even if it is “untrue, useless and very offensive.”

Thus, on the assumption that Denke was a “public official” as contemplated by New York

Times, the City maintains that her complaint about “retaliatory speech” was properly

dismissed.

¶62    We conclude that the City’s reliance on Skinner, § 27-1-804, MCA, and New York

Times is misplaced. Skinner was a defamation suit against an individual who spoke at a

Great Falls City Commission meeting. The instant action, however, is not a defamation

suit. Nor is it against anyone who spoke at the February 14 council meeting (aside from

Shoemaker, whose liability is not at issue in this appeal). And we do not perceive in

Denke’s arguments any suggestion that the City should be held liable for statements

made by anyone at the meeting other than Shoemaker. Denke does intimate at a couple

of points in her opening brief that the City itself “defamed” her; however, as discussed

above, this does not appear to be the substance of her claim against the City. And if it is

one of her theories of liability, she offers no explanation or analysis of how the City

“defamed” her, thus rendering the theory improperly presented for appellate review. In

re Marriage of McMahon, 2002 MT 198, ¶ 6, 311 Mont. 175, ¶ 6, 53 P.3d 1266, ¶ 6.

¶63    For these reasons, Skinner and § 27-1-804, MCA, are inapt, and the same can be

said of New York Times. Even if Denke, as a municipal Town Clerk/Finance Officer,

qualifies as a “public official” or “public figure” under New York Times and its progeny

the principles articulated in those cases respecting the intersection of constitutional free

speech and defamation law are not at issue here.


                                            30
V.     Conclusion

¶64    In sum, we hold that the City cannot prevail in asserting either § 2-9-111, MCA, or

§ 2-9-114, MCA, as a defense to Denke’s claim of unlawful retaliation based on the

City’s conduct of the discussion of the Denke-related agenda item at the February 14

council meeting. As for the alternative defenses raised by the City, we conclude that

§ 27-1-804, MCA, and New York Times are inapplicable here; and while we agree with

the City that it could not lawfully have regulated the particular viewpoints expressed by

speakers related to Denke’s 1999 Human Rights complaint, we disagree with the City’s

contention that it could not have imposed any restrictions on the discussion at all. We

accordingly reverse the hearing examiner’s, the HRC’s, and the District Court’s

immunity determinations and remand this matter for further proceedings consistent with

the foregoing discussion.

¶65    Issue 2. Is the District Court’s order denying Denke’s petition for judicial
       review overbroad?

¶66    Denke contends that the District Court’s order denying her petition for judicial

review is overbroad. The District Court held that the City was not liable for Shoemaker’s

letters because he “was not acting within the scope of his duties as a councilperson when

he wrote the defamatory letters.” In addition, however, the court also stated that the City

“is not liable for Councilman Shoemaker’s letters to the editor, or for comments made by

those attending the council meeting because of § 27-1-804, MCA protecting privileged

communication and the Montana Supreme Court case of Skinner vs. Pistoria, 194 Mont.

257, 633 P.2d 672 (1981)” (emphasis added). As Denke correctly points out, this latter



                                            31
rationale not only is beyond the scope of the issues before the District Court, but also

amounts to a sua sponte reversal of a final determination concerning Shoemaker’s

liability for his letters.

¶67     First, a ruling that the City is not liable for comments made “by those attending the

council meeting” is overbroad, since Denke has not sought to hold the City liable for the

comments of anyone except Shoemaker. Second, the proceedings in the District Court

related to Shoemaker were stayed by virtue of his filing a bankruptcy petition. As a

result, a ruling that Shoemaker’s comments at the council meeting were privileged under

§ 27-1-804, MCA, is premature. Third, the hearing examiner determined that § 27-1-804,

MCA, did not apply to Shoemaker’s letters. As explained above, Shoemaker forfeited his

appeal of this determination. See Shoemaker v. Denke, 2004 MT 11, 319 Mont. 238, 84

P.3d 4. Thus, the District Court was not in a position to enter a contrary ruling that his

letters were privileged under § 27-1-804, MCA.

¶68     For these reasons, it is necessary to vacate the District Court’s statement in its

Order Denying Petition for Judicial Review that “the Respondent city of Thompson Falls

is not liable for Councilman Shoemaker’s letters to the editor, or for comments made by

those attending the council meeting because of § 27-1-804, MCA protecting privileged

communication and the Montana Supreme Court case of Skinner vs. Pistoria, 194 Mont.

257, 633 P.2d 672 (1981).” If and when the bankruptcy stay is lifted, the District Court

may then revisit the issue of whether Shoemaker’s comments at the February 14 council

meeting were privileged and, if necessary, the issue of whether the City is liable for those

comments.


                                             32
¶69    Issue 3. Is the City liable for Shoemaker’s actionable retaliatory conduct?

¶70    The hearing examiner determined that Shoemaker illegally retaliated against

Denke when he circulated his January 6 and January 19 letters.             In particular, the

examiner held Shoemaker liable for (1) the statements in the January 6 letter, made with

reckless disregard for their truth or falsity, that it was Denke’s fault the City had to spend

$50.00 per hour for the CPA to implement changes in accounting procedures and (2) the

provably false suggestion in the January 19 letter that Denke and the mayor both received

payments from the City to settle her sexual harassment and retaliation claims against the

mayor. The examiner awarded Denke $7,500.00 for the severe emotional distress she

suffered as a result of Shoemaker’s illegal discriminatory actions. As for Shoemaker’s

comments at the February 14 council meeting, however, the examiner decided those were

privileged under § 27-1-804(2), MCA. Thus, the examiner denied relief on this portion

of Denke’s complaint.

¶71    Denke contends that the City may be held liable for Shoemaker’s “actionable”

conduct. It is necessary here to identify which conduct by Shoemaker presently qualifies

as “actionable.” As noted, the HRC dismissed his cross-appeal on procedural grounds,

and this Court affirmed that dismissal in Shoemaker v. Denke, 2004 MT 11, 319 Mont.

238, 84 P.3d 4. As a result, there are no further determinations to be made with respect to

Shoemaker’s liability for the retaliatory statements and innuendos in his letters; the award

of $7,500.00 in favor of Denke is final. But with respect to Shoemaker’s comments at

the February 14 council meeting, Denke asserted in her petition for judicial review that

the HRC erred in its conclusion that those comments were privileged under § 27-1-804,


                                             33
MCA. Due to the bankruptcy stay in the District Court, this issue has not yet been

decided. In other words, it remains to be determined by the District Court—and, if an

appeal ensues, by this Court—whether Shoemaker is subject to liability for the comments

he made related to Denke’s 1999 Human Rights Complaint at the council meeting.

¶72    Accordingly, Denke appropriately limits her discussion under Issue 3 to the City’s

liability for Shoemaker’s retaliatory statements and innuendos in his letters, and we do

the same. At this point in time, that is the only “actionable” conduct for which the City

might be held liable. We express no view on the City’s liability for the comments made

by Shoemaker at the February 14 council meeting, as it has not yet been determined, as a

final matter, whether those statements are in fact “actionable.”

¶73    Respondeat superior is a doctrine of the law of agency by which the consequences

of one person’s actions may be attributed to another person. Saucier v. McDonald’s

Restaurants of Montana, Inc., 2008 MT 63, ¶ 64, 342 Mont. 29, ¶ 64, 179 P.3d 481, ¶ 64.

Denke points out, and the City does not dispute, that an employer may be liable, on the

basis of respondeat superior, for an illegal discriminatory act by its employee. See Vainio

v. Brookshire, 258 Mont. 273, 278-79, 852 P.2d 596, 600 (1993).

¶74    An employer is liable for the acts of an employee only when the employee is

acting “within the scope of his or her duties to the employer.” Bowyer v. Loftus, 2008

MT 332, ¶ 8, 346 Mont. 182, ¶ 8, 194 P.3d 92, ¶ 8; see also Kenyon v. Stillwater County,

254 Mont. 142, 146, 835 P.2d 742, 745 (1992) (“Governmental entities in Montana are

subject to liability for their own wrongful conduct and that of their employees acting

within the scope of their duties.” (citing § 2-9-102, MCA)). Whether an act was within


                                             34
the scope of employment is generally a question of fact; however, it is a question of law

for the court when only one legal inference may reasonably be drawn from the facts.

Bowyer, ¶ 8.    Based on these principles, the relevant questions are (1) whether

Shoemaker was an employee of the City in January 2000 and (2) whether his actions

occurred within the scope of his employment.

¶75    With respect to the first question, Denke cites Kenyon and § 2-9-101(2), MCA

(1999), for the proposition that Shoemaker was a City employee. Section 2-9-101(2),

MCA, defines “employee” as “an officer, employee, or servant of a governmental entity,

including elected or appointed officials, . . . .” In Kenyon, we held that for liability

purposes under Montana statutes, “elected county officials are employees of the county.”

Kenyon, 254 Mont. at 146, 835 P.2d at 745 (citing § 2-9-101, MCA). Extending this

holding to the case at hand, Denke asserts that elected city officials are employees of the

city. The City concedes that Shoemaker was “employed” by the City in January 2000.

¶76    With respect to the second question, Denke proffers three reasons why Shoemaker

was acting within the scope of his employment when he wrote the letters. First, Denke

cites Shoemaker’s testimony at the contested case hearing that he wrote both letters “as a

private citizen and as a Thompson Falls council person.” Second, Denke notes that

Shoemaker signed the January 6 letter as “Maurice Shoemaker, Council Person Ward

#1.”   Third, Denke contends that the City admitted this point in the course of the

proceedings before the Department of Labor and Industry. In response, the City offers

three arguments why respondeat superior liability should not apply here. We address

those three arguments in turn.


                                            35
¶77    First, citing Vainio and E.E.O.C. v. Hacienda Hotel, 881 F.2d 1504, 1515 (9th Cir.

1989), the City claims that respondeat superior applies in the discrimination context only

if the discriminatory act was committed by the complainant’s “supervisor.” Thus, the

City contends, since Shoemaker was not Denke’s supervisor, the City is not liable for his

unlawful retaliatory conduct. The cases cited by the City, however, do not support such a

rule. It is true that Vainio and Hacienda Hotel involved discrimination (specifically,

sexual harassment) by a “supervisor,” but neither case states that respondeat superior

applies only to conduct by a “supervisor.” In fact, what we stated in Vainio was that

“[a]ll that is needed to make [the employer] subject to the administrative proceeding is

for [the employee] to allege that [the perpetrator], an agent of [the employer], committed

unlawful sexual discrimination.” Vainio, 258 Mont. at 279, 852 P.2d at 600 (emphasis

added). This statement is consistent with the fact, noted above, that respondeat superior

is a doctrine of the law of agency. Saucier, ¶ 64.

¶78    Second, the City invokes Aristotle’s Logica for the proposition: “Something has

to be or not be. Something cannot both be and not be.”2 Applying this principle here,

the City argues that either Shoemaker was engaged in “legislative behavior” when he

wrote the letters, in which case his statements were privileged under § 27-1-804, MCA,

or he was not engaged in “legislative behavior” when he wrote the letters, in which case

he was not acting within the scope of his employment. “Either way,” the City asserts,

“Denke loses.” The City also posits that “Aristotle would have agreed with the HRC.”

       2
        Schrödinger’s cat, who was both alive and dead until its box was opened, might
dispute this contention. See E. Schrödinger, Die gegenwärtige Situation in der
Quantenmechanik, 23 Die Naturwissenschaften 807-12, 823-28, 844-49 (1935).

                                            36
¶79    At first glance, the City’s reasoning has some appeal. Essentially, the City argues

that if Shoemaker’s letters were not published “in the proper discharge of an official

duty” for purposes of § 27-1-804(1), MCA, as the hearing examiner found, then he could

not have been acting “within the scope of his duties to the City” for purposes of

respondeat superior liability.    The flaw in the City’s reasoning, however, is the

assumption that these two standards are equivalent. They are not. Unlawful retaliatory

conduct does not qualify as “the proper discharge of an official duty” for purposes of

§ 27-1-804(1), MCA. In contrast, the doctrine of respondeat superior is designed to hold

an employer liable for the wrongful conduct of its employee. The doctrine actually

contemplates that wrongful conduct (such as unlawful retaliation) was committed within

the scope of employment. Accordingly, the fact that Shoemaker’s retaliatory statements

were not privileged under § 27-1-804(1), MCA, does not mean that the City cannot be

held liable under the doctrine of respondeat superior for his making those statements—

Aristotle’s Logica notwithstanding.

¶80    Third, and lastly, the City simply denies that Shoemaker was acting within the

scope of his employment when he wrote the letters. The City claims that “Shoemaker is

a legislator” and was not acting “within the scope of his employment as a legislator.”

The City reasons that “Shoemaker wrote and sent the letters on his own time outside of

any sort of Council meeting.” We agree with Denke, however, that the City’s denials

directly contradict the City’s prior admissions.

¶81    In its brief in support of its motion for summary judgment filed in the Department

of Labor and Industry, the City made a number of assertions concerning Shoemaker’s


                                             37
function in writing the January 2000 letters. First, the City explained that Shoemaker felt

it was his “legislative duty” to provide a forum for the townspeople to discuss Denke’s

job performance and the settlement of her 1999 Human Rights complaint, and when the

mayor initially refused his request to be put on the agenda, Shoemaker wrote the two

letters out of frustration, which in turn prompted the mayor to provide Shoemaker the

forum he had requested (a place on the council meeting agenda). Second, the City

asserted that “[a]s a City Council Person, Shoemaker has a responsibility to his

constituency to examine, debate and even verbally attack the Clerk if he disapproves of

the clerk’s job performance.” Third, the City acknowledged that Shoemaker’s letters

“weren’t written either in legislative chambers or during an actual legislative session,”

but the City argued that certain “actions by local government legislators are absolutely

privileged,” including Shoemaker’s various statements in his letters.

¶82    In addition to these assertions, the City explicitly took the view that Shoemaker

was acting as “a legislator” when he took his concerns about Denke to the press:

       The H.R.C. should also note that Shoemaker was forced to go to the press
       with his legislative concerns after Shoemaker was denied his right to air his
       concerns about Denke at a city council meeting. H.R.C. Final Invest. Rep.
       p. 7, para. 3. It’s ironic that Shoemaker was denied access to the city
       council meeting by the perpetrator of the originally alleged sexual
       harassment. Infra. It’s hard to imagine a state agency not recognizing, that
       in the United States of America, a legislator has both the moral obligation
       and the legally protected right to take his concerns about a public official to
       the press after being denied the right to air his concerns during a legislative
       session.

¶83    The City acknowledges these statements but contends they were made in support

of “affirmative defenses.” Yet, the City offers no insight whatsoever as to how this fact



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bears on our analysis. We have held that a party or its attorney may make judicial

admissions in a brief supporting a motion for summary judgment and that such an

admission “has a conclusive effect upon the party who makes it, and prevents that party

from introducing further evidence to prove, disprove, or contradict the admitted fact.”

Bitterroot Int’l Systems, Ltd. v. Western Star Trucks, Inc., 2007 MT 48, ¶¶ 41-43, 336

Mont. 145, ¶¶ 41-43, 153 P.3d 627, ¶¶ 41-43.          The City cites no authority for the

proposition that the rules of judicial admissions do not apply to affirmative defenses.

¶84    Of course, to be binding a judicial admission must be “an unequivocal statement

of fact.” In re Raymond W. George Trust, 1999 MT 223, ¶ 37, 296 Mont. 56, ¶ 37, 986

P.2d 427, ¶ 37. Here, the City asserted in its brief, on more than one occasion, that

Shoemaker was acting in his role as a “legislator” or “councilperson” when he wrote the

January 2000 letters.      The City referred to Shoemaker’s “legislative duty” and

“responsibility to his constituency” to provide a forum in which to “examine, debate and

even verbally attack” Denke if he disapproved of her job performance.              The City

characterized Shoemaker’s letter writing as a means to fulfill this duty/responsibility.

Indeed, the City explicitly argued that “a legislator has both the moral obligation and the

legally protected right to take his concerns about a public official to the press after being

denied the right to air his concerns during a legislative session.”

¶85    The City’s assertions are confirmed by the actual language of Shoemaker’s letters.

Shoemaker signed the January 6 letter as “Maurice Shoemaker, Council Person Ward

#1.” In this letter, he purported to reveal information that he, as a councilperson, wanted

the public to know, such as the fact that there were “things going on at city hall that the


                                             39
public should know about.” Shoemaker asserted that the Ledger never printed any of the

“negative city business,” and he stated: “Some of you will be surprised. Believe me, we

do not have a perfect city government.” Shoemaker explained that he was writing this

letter because the mayor had refused to put him on the next council meeting agenda to

discuss matters which “concerned the city and should be of interest to the public.”

Likewise, in his January 19 letter, Shoemaker indicated his desire to inform the public of

what was going on at city hall, and he lamented the fact that the mayor had refused to put

him on the agenda. Shoemaker stated: “I believe that what goes on at city hall should

not be kept from the public.” As noted, the City stated in its summary judgment brief

that Shoemaker, as “a legislator,” had “both the moral obligation and the legally

protected right to take his concerns about a public official to the press after being denied

the right to air his concerns during a legislative session.”

¶86        We conclude that the City’s statements constitute judicial admissions that

Shoemaker was acting in his capacity as a councilperson when he wrote the January 2000

letters.     We further conclude that these judicial admissions preclude the City from

arguing now the diametrically opposite position that Shoemaker was not acting within the

scope of his employment as a legislator when he wrote the letters.

¶87        Aside from the rules of judicial admissions, Denke also directs our attention to

§ 2-9-305, MCA (1999). Subsection (1) states that “[i]t is the purpose of this section to

provide for the immunization, defense, and indemnification of public officers and

employees civilly sued for their actions taken within the course and scope of their

employment.” Section 2-9-305(1), MCA. Subsection (5), in turn, provides that in an


                                              40
action against a governmental entity based on the conduct of an employee, the employee

is immune from liability if the governmental entity “acknowledges” that the employee’s

conduct arose “out of the course and scope of the employee’s employment” (except in

circumstances not relevant here). Section 2-9-305(5), MCA. This provision lends further

support to our conclusion that the City’s “acknowledgements” in its motion for summary

judgment render the City liable for Shoemaker’s conduct in circulating the unlawful

retaliatory statements and innuendos in his letters.

¶88    In light of the City’s admissions that Shoemaker was a City employee in January

2000 and was acting in his capacity as a councilperson when he wrote the letters, the City

may be held liable under the doctrine of respondeat superior for this retaliatory conduct.

                                     CONCLUSION

¶89    We hold that the City cannot prevail in asserting § 2-9-111, MCA, or § 2-9-114,

MCA, as a defense to Denke’s claim of unlawful retaliation based on the City’s conduct

of the discussion of the Denke-related agenda item at the February 14 council meeting.

We accordingly reverse the District Court’s contrary conclusion and remand with

instructions that the District Court order the hearing examiner to make a determination, in

the first instance, as to whether the City’s conduct of the February 14 council meeting

constituted unlawful retaliation as alleged by Denke.

¶90    We further hold that the City is liable under the doctrine of respondeat superior for

Shoemaker’s illegal retaliation against Denke arising out of his January 2000 letters. We

reverse the District Court’s contrary conclusion and remand with instructions that the

District Court enter judgment in favor of Denke on this claim.


                                             41
¶91    In addition, for the reasons explained in Issue 2, we vacate the statement in the

District Court’s Order Denying Petition for Judicial Review that the City “is not liable for

Councilman Shoemaker’s letters to the editor, or for comments made by those attending

the council meeting because of § 27-1-804, MCA protecting privileged communication

and the Montana Supreme Court case of Skinner vs. Pistoria, 194 Mont. 257, 633 P.2d

672 (1981).”

¶92    Reversed and remanded for further proceedings consistent with this Opinion.



                                                 /S/ JAMES C. NELSON


We Concur:


/S/ KARLA M. GRAY
/S/ PATRICIA COTTER
/S/ JIM RICE




Justice Brian Morris specially concurs.

¶93    I agree that the District Court erred in concluding that the City enjoyed immunity

from suit and that the City could not be liable for Shoemaker’s actionable retaliatory



                                            42
conduct. Section 2-9-111(3), MCA, would shield both the City and Shoemaker, as a

member of the City Council, from a suit for damages if they had been engaged in the

lawful discharge of an official duty associated with legislative acts. A “legislative act”

includes those actions that result in creation of law or declaration of public policy.

Section 2-9-111(1)(c)(i)(A), MCA. A “legislative act” does not include administrative

actions.   Section 2-9-111(1)(c)(ii), MCA.       I fail to see how either the City’s or

Shoemaker’s conduct constituted legislative action.

¶94    Under Bechard v. Rappold, 287 F.3d 827, 829 (9th Cir. 2002), a court should

consider two questions when determining whether an act is legislative. First, a court

must determine whether the act involves ad hoc decision making or the formulation of

policy; and second, whether the act applies to a few individuals or to the public at large.

Bechard, 287 F.3d at 829. A court also should consider whether the act was formally

legislative and whether the act bears all the hallmarks of traditional legislation. Bechard,

287 F.3d at 829.

¶95    The City passed no laws and formulated no policies during the meeting. The City

discussed no proposed laws or policies during its meeting.          The City limited the

discussions to Denke’s HRC complaint. A decision to demote and to discharge a specific

individual constitutes an “administrative” act for which legislative immunity does not

apply. Bechard, 287 F.3d at 829. The City did not even discuss any law or formulation

of new policy regarding Denke’s HRC complaint.            The City also made additional

administrative decisions-- in direct opposition to their non-retaliation agreement--to use a

larger building to accommodate greater attendance at the meeting and to allow unlimited


                                            43
public comment on Denke’s employment matter.

¶96    The City now argues that Denke, in her role as a long-time city clerk, should have

“noticed that offending public officials with obnoxious comments is in itself a traditional

hallmark of legislation in our country.” I fail to understand how placing an item on the

agenda of a public meeting specifically to denigrate a City employee’s right to bring an

action against her supervisor’s alleged sexual harassment bears the hallmark of traditional

legislation. The City enjoys no legislative immunity pursuant to § 2-9-111(3), MCA.

¶97    I agree with the Court, ¶ 88, that the doctrine of respondeat superior transfers

responsibility for Shoemaker’s actions to the City.      Legislative immunity offers no

protection to the City for Shoemaker’s conduct as a City Council member because his

actions were not legislative. Shoemaker’s actions in no way concerned the creation of a

new law or declaration of public policy. He claims to have grown concerned about

Denke’s HRC complaint after community members approached him to clarify the

settlement amount. Shoemaker testified that these community members informed him

that rumors had circulated that Denke had received a $15,000 settlement.

¶98    Shoemaker knew these rumors to be false as he had signed the settlement

agreement specifying that Denke would receive $508 in medical bills and restoration of

her sick leave. Shoemaker also knew that the settlement agreement obligated the City not

to retaliate against Denke as a result of her decision to file the HRC complaint.

Shoemaker believed, however, that the community’s rumors of a higher settlement

amount made him look bad and that “a finger had been pointed at him as a representative

of the City.” As a result, Shoemaker felt unburdened to retaliate against Denke in direct


                                            44
contravention of the settlement agreement.

¶99   Shoemaker claimed that he wanted time on the agenda to answer questions

concerning the settlement agreement arising from Denke’s sexual harassment charges

against the mayor: “I do not know [who got the money or what happened] as nothing has

been told to me. Some one [sic] seems to want to sweep this under the carpet and not let

the public know about it!” Shoemaker, as a signatory to the settlement agreement,

however, possessed specific knowledge of both Denke’s allegations and the terms of the

settlement agreement. In fact, the City and Denke settled Denke’s HRC action at a

regularly called meeting of the City Council that was open to the public at Denke’s

election. Shoemaker attended that meeting. He reviewed the terms of the settlement

agreement. And he approved the settlement agreement.

¶100 Shoemaker’s insistence to have Denke’s settlement agreement placed on the

agenda applied solely to Denke and did not constitute policy making. Shoemaker sat on

the stage at the meeting in his capacity as a member of the City Council. Shoemaker

engaged in no legislative acts when he used his City Council position to smear Denke to

protect his own political reputation and promote his “personal philosophy.” Bechard

provides no protection for Shoemaker’s actions and he should not be allowed to seek

refuge behind § 2-9-111, MCA.

¶101 Shoemaker’s behavior taken as a whole, although it contains elements of speech,

represents precisely the type of action that the Montana Human Rights Act prohibits. At

the very least, the settlement agreement that Shoemaker signed in his official capacity

precluded this type of craven attack. Denke’s odyssey drives home the old maxim: “You


                                             45
don’t fight City Hall.” United States v. Barker, 942 F.2d 585, 597 (9th Cir. 1991)

(Noonan, J., dissenting).


                                        /S/ BRIAN MORRIS


Justices W. William Leaphart and John Warner join in the foregoing special concurrence.


                                        /S/ W. WILLIAM LEAPHART
                                        /S/ JOHN WARNER




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