                IN THE UNITED STATES COURT OF APPEALS

                        FOR THE FIFTH CIRCUIT

                        _____________________

                             No. 92-2333
                        _____________________


     RAFIQ A. DANAWALA,

                                      Plaintiff-Appellant,

                                 versus

     HOUSTON LIGHTING & POWER COMPANY, ET AL.,

                                      Defendants-Appellees.

     _______________________________________________________

           Appeal from the United States District Court for
                    the Southern District of Texas

     _______________________________________________________
                         August 24, 1993

Before REAVLEY, DUHÉ AND BARKSDALE, Circuit Judges.

REAVLEY, Circuit Judge:

     Rafiq A. Danawala sued Houston Lighting & Power (HL&P) and

HL&P Supervisor William Wellborn (collectively defendants),

claiming that Wellborn defamed him by communicating to others

that he falsified a document.     After the jury returned a verdict

in favor of Danawala, the district court granted the defendants'

motion for judgment as a matter of law, and conditionally granted

the defendants' alternative motion for a new trial.     Danawala

appeals.    We hold that Wellborn's communications were privileged

and affirm the district court's judgment.

                            I.   BACKGROUND
     Danawala worked as an independent contractor with HL&P at

the South Texas Nuclear Project (STNP).      He worked as an engineer

in the Master Parts List Group (the MPL Group), which was

responsible for verifying that any changes in vendors' parts

conform with the fit, form, and function of the original parts.

     Defendant Wellborn supervised the MPL Group, which consisted

mostly of contract personnel.   In 1989, HL&P established a

company policy requiring the MPL Group engineers to obtain

written verification from the vendor's engineering or quality

assurance department that the part change did not affect the fit,

form, or function of the original part.1

     In January 1990, Danawala contacted Ken McKay at vendor

Envirex to verify a part's conformity.     McKay, who worked in

Envirex's sales and marketing department, returned a written

confirmation of the part's conformity.     After completing the

verification documents, Danawala forwarded them to his

supervisors.   According to Danawala, Kanu Patel, who provided

technical support to the MPL Group engineers, returned the

documents to Danawala to inquire about McKay's position at

Envirex.   Danawala testified that, when he told Kanu Patel that

McKay was an engineer, Kanu Patel instructed him to write

     1
         The policy specifically provides:

     2.1.1. Part number changes that do not impact fit,
     form[,] function, or material. These changes shall be
     considered administrative and shall require a signed
     letter from the vendor's Engineering or Quality
     Assurance organization stating that the change is
     administrative only and does not affect fit, form,
     function, or material.

                                 2
"engineer" beside McKay's name.   After Danawala wrote "engineer"

next to McKay's name, he sent the documents back to his

supervisors.   The documents eventually reached supervisor

Wellborn, who discovered that McKay worked in Envirex's sales and

marketing department, and was not an engineer.

     By failing to get verification from the engineering or

quality assurance department, Danawala violated HL&P's company

policies.   Danawala testified that he simply acted on the

mistaken belief that McKay was an engineer capable of verifying a

part change.   According to Danawala, Envirex's engineering

department referred him to McKay.

     Wellborn accused Danawala of "falsifying" a company document

and terminated Danawala's services with HL&P.    Wellborn testified

that he notified seven people of Danawala's termination for

"falsifying" a document, and then met with the members of the MPL

Group to re-emphasize the importance of proper verification.

     Danawala sued HL&P and Wellborn for defamation.   At trial,

HL&P argued that (1) the alleged defamatory statement was true,

and (2) Wellborn's communications were privileged because

Wellborn published the statement only to HL&P workers who had an

interest in the subject matter.   The district court submitted

issues of truth, privilege, causation, and damages to the jury.

The jury returned a verdict in favor of Danawala, finding him

entitled to $1.5 million in actual damages and $5 million in

punitive damages.   The defendants filed a motion for judgment as

a matter of law and an alternative motion for new trial.     The


                                  3
district court entered judgment as a matter of law in favor of

HL&P, holding that: (1) the defamatory statement was true; (2)

the defendants did not publish the accusation to anyone other

than people reasonably interested in the matter; (3) the

defendants did not act with malice; and (4) Danawala failed to

prove damages.    The district court also granted a conditional new

trial in the event that its judgment as a matter of law is

overturned on appeal.     We will assume that the defendants'

communications were defamatory but affirm the judgment as a

matter of law on the ground that they were privileged.

                              II.   ANALYSIS

A.   QUALIFIED (OR CONDITIONAL) PRIVILEGE

     In Texas, a communication made on a subject matter in which

the person making it has an interest is privileged if made to

persons having a corresponding interest or duty.     Bozé v.

Branstetter, 912 F.2d 801, 806 (5th Cir. 1990).     This privilege

protects statements made by an employer concerning an employee.

Bergman v. Oshman's Sporting Goods, Inc., 594 S.W.2d 814, 816

(Tex.Civ.App.))Tyler 1980, no writ) ("Accusations against an

employee by his employer or another employee, made to a person

having a corresponding interest or duty in the matter to which

the communication relates, are qualifiedly privileged.").       This

privilege is "based on a public policy that recognizes the need

for the free communication of information to protect business and

personal interests.     To encourage open communication, it is

necessary to afford protection from liability for misinformation


                                     4
given in an appropriate effort to protect or advance the

interests involved."     Gaines v. CUNA Mutual Ins. Soc'y, 681 F.2d

982, 986 (5th Cir. 1982).    The privilege is lost, however, if the

plaintiff can show that the defendant acted with actual malice.

Id.   Once the underlying factual disputes are resolved, whether a

qualified privilege exists is a question of law.    Bozé, 912 F.2d

at 806.

      The parties in this case dispute (1) whether Wellborn

communicated to persons not having a corresponding interest in

the subject matter and (2) whether Wellborn made the statements

with malice.    The district court submitted these two issues to

the jury, and the jury found that Wellborn published the

statement to people not reasonably interested in the subject

matter and that Wellborn made the statements with malice.     In

ruling on the judgment as a matter of law, the district court

disregarded both of these jury findings.    See FED. R. CIV. P.

50(b)      1.    Excessive Publication

      Wellborn testified that he told seven people that Danawala

had been dismissed for falsifying a document:    Roger Garris,

Steve Dew, Nitan Patel, Mike Polishak, Steve Veselka, James

Mertink, and Claude Grimes.    Garris and Dew were Wellborn's

supervisors.    Nitan Patel was one of Danawala's supervisor and

had signed the documents in question.    Polishak worked in the MPL

Group and was involved in the initial inquiry into the incident.

Veselka worked in the MPL Group and assisted Wellborn with

administrative duties.    Mertink was a supervisor of the Spare


                                  5
Parts Engineering Group, which issued similar documents that had

to be approved by Wellborn.   Wellborn told Mertink about the

"falsification" incident so that Mertink would "watch for those

things" before sending documents to him.   Grimes was a member of

HL&P's human resources department, which has responsibility over

HL&P's employees, but not contract workers such as Danawala.

Wellborn testified that he called Grimes (a) to verify that the

human resources department had no jurisdiction over contract

workers and (b) to find out what the proper procedures would have

been if Danawala had been an HL&P employee.   A few days after

Danawala's termination, Grimes was assigned to address Danawala's

"speakout" complaint that HL&P had wrongfully terminated him.2

Wellborn's communications to these seven people fall well within

the qualified privilege.

     A few days after Danawala's termination, Wellborn met with

the members of the MPL Group to re-emphasize the importance of

proper verification.   Two of the workers who attended the meeting

testified that Wellborn discussed "falsification of documents" at

the meeting and that they understood that Wellborn was alluding

to Danawala.   Even if Wellborn alluded to Danawala at the

meeting, Wellborn's communications to other MPL Group members,




     2
        The South Texas Project "Speakout" program provides
workers a means to communicate concerns relating to the safety or
quality of the South Texas Project. The manager of the
"Speakout" program referred Danawala's complaint to HL&P's human
resources department because the complaint was unrelated to
nuclear safety or quality.

                                 6
who have an interest in the reasons underlying Danawala's

discharge, fall within the scope of the qualified privilege.

     At trial, Danawala presented evidence that the falsification

accusation spread to people outside of HL&P.    Danawala testified

that, within a few hours of his termination, he received a call

from Rick Massay, a former HL&P worker, who had learned about the

falsification accusation.    The record does not reveal, however,

who told Massay and in what context.    Another former HL&P worker,

Joe Navillo, learned that Danawala had been terminated for

falsifying a document.    Navillo testified that he learned of the

accusations during a social, non-business-related conversation

with one of the HL&P contract workers.    On appeal, Danawala

argues that these "secondary publications" destroy the

defendants' qualified privilege because Wellborn knew or should

have known that his accusation would spread to outside parties.

We disagree.    There is no evidence that Wellborn or any other

HL&P supervisor communicated the accusation to persons not

reasonably interested in the subject matter.    The unauthorized

gossip spread by unidentified co-workers of Danawala does not

take the defendants outside the scope of their qualified

privilege.     Compare Perry Bros. Variety Stores, Inc. v. Layton,

25 S.W.2d 310, 313 (Tex. 1930) (qualified privilege lost where

the store manager charged customer with shoplifting in the




                                  7
presence of other customers who were in the store open to the

general public).3

     Finally, Danawala presented evidence that, after HL&P

released him for falsifying a document, he had difficulty finding

long-term employment.     But Danawala presented no evidence that

any prospective employer ever learned of HL&P's reasons for

terminating Danawala.     The district court correctly observed that

Danawala failed to show a causal connection between his failure

to find long-term employment and HL&P's accusations.

     Based on the overwhelming evidence at trial, we conclude

that the defendants did not lose their qualified privilege

through excessive publication.     The district court properly

disregarded the jury's contrary finding of excessive publication.

FED. R. CIV. PRO. 50(b); Boeing Co. v. Shipman, 411 F.2d 365, 374-

75 (5th Cir. 1969) (en banc).

     2.   Actual Malice

     The defendants' privilege is lost if Danawala shows that

Wellborn published the statement with actual malice.     Seidenstein

v. National Medical Enter., 769 F.2d 1100, 1103-04 (5th Cir.

1985).    To show actual malice, Danawala must show that Wellborn

published the statement knowing it to be false, or with a high

degree of awareness of its probable falsity.     Id. at 1104.    The

focus is on Wellborn's state of mind at the time of publication.


     3
        See also Rouly v. Enserch Corp., 835 F.2d 1127, 1131-32
(5th Cir. 1988) (applying Louisiana law); Garziano v. E.I. Du
Pont De Nemours & Co., 818 F.2d 380, 395 (5th Cir. 1987)
(applying Mississippi law).

                                   8
See id.   "Proof of falsity in fact is not enough, nor is proof of

a combination of falsehood and general hostility."       Id.

     Danawala contends that the jury could have reasonably

inferred actual malice from Wellborn's testimony at trial.

Wellborn agreed at trial that the term "falsification" implies an

intent to deceive, something more than a mere mistake.         Wellborn

also acknowledged at trial that Danawala had made a "mistake."

Danawala argues on appeal that the jury could have reasonably

inferred from these statements that Wellborn knew that his

falsification accusation, which implies deceit, was untrue.        We

disagree.

     Wellborn testified that he believed that his accusation of

falsification was true or substantially true.      He further

explained that he believed that Danawala was attempting to

deceive HL&P by writing "engineer" on the document instead of

following the proper procedures.       It is true that Wellborn agreed

that Danawala had made a "mistake."      But Wellborn elaborated

during cross examination that Danawala's "mistake" was writing

"engineer" on the document without verifying that McKay was a

member of the engineering or quality assurance department.        His

statement that Danawala made a "mistake" must be read with the

rest of his testimony and is in accord with his belief that

Danawala was attempting to deceive HL&P by making the document

appear like he had complied with the proper procedures.

Wellborn's testimony is insufficient to support the jury finding

of malice.


                                   9
     Danawala asserts that the evidence at trial shows that

Wellborn's attitude toward Danawala was "abusive, mean, and

vindictive."    The record does contain some evidence (mostly

through Danawala's testimony) that Wellborn harbored some ill

feelings toward Danawala.          But we agree with the district court

that this evidence of animosity is insufficient for a reasonable

juror to infer actual malice )) that Wellborn knew the statement

was false or had a high degree of awareness of its probable

falsity.

B.   INTENTIONAL INFLICTION   OF   EMOTIONAL DISTRESS

     In addition to defamation, Danawala's complaint raised a

claim for intentional infliction of emotional distress.                 Prior to

trial, the district court dismissed this claim, leaving only

Danawala's defamation claim.

     To recover for intentional infliction of emotional distress,

Danawala must establish that (1) Wellborn acted intentionally or

recklessly, (2) Wellborn's conduct was extreme and outrageous,

(3) Wellborn's actions caused him emotional distress, and (4) the

emotional distress was severe.            Twyman v, Twyman, 855 S.W.2d 619,

___ (Tex. 1993).    "Outrageous conduct is that which '[goes]

beyond all possible bounds of decency, and to be regarded as

atrocious, and utterly intolerable in a civilized community.'"

Wornick Co. v. Casas, 1993 WL 233445 at *2, ___                 S.W.2d ___, ___

(Tex. 1993) (quoting RESTATEMENT (SECOND)         OF    TORTS § 46, cmt. d).

"'It is for the court to determine, in the first instance,

whether the defendant's conduct may reasonably be regarded as so


                                         10
extreme and outrageous as to permit recovery.'"             Id. (quoting

RESTATEMENT (SECOND)   OF   TORTS § 46, cmt. h).    Without question, the

record to support this claim has been fully developed.            And it

reveals that Wellborn's conduct, as a matter of law, did not

"exceed all possible bounds of decency" and was not "utterly

intolerable in a civilized community."             See Diamond Shamrock

Refining and Mktg. Co. v. Mendez, 844 S.W.2d 198, 201-02 (Tex.

1992), cited in Wornick, 1993 WL 233445, at *3; Johnson v.

Merrell Dow Pharmaceuticals, Inc., 965 F.2d 31, 33-34 (5th Cir.

1992); Wilson v. Monarch Paper Co., 939 F.2d 1138, 1142-45 (5th

Cir. 1991); Dean v. Ford Motor Credit Co., 885 F.2d 300, 306-07

(5th Cir. 1989).       We thus affirm the district court's dismissal

of Danawala's claim for intentional infliction of emotional

distress.

     AFFIRMED.




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