by Steve Timmer

Jul 25, 2012, 12:00 PM

Indemnifying Cal

Cal the Freeloader

As virtually all of you know by now, Michael Brodkorb has followed through on his promise to sue the Minnesota Senate for, inter alia, wrongful termination. You can see a copy of the complaint, filed in state court in Ramsey County, at the link. There won’t be another recitation of the facts of the case here; if you need it, you probably won’t be interested in this story anyway.

In addition to naming the Senate as a defendant, Brodkorb and his lawyers also named the Secretary of the Senate, Cal Ludeman, as a party-defendant. In counts 8, 9, and 10 — or VIII, IX, and X, as they are styled in the complaint — Brodkorb alleges that I) Ludeman defamed him when he said that Brodkorb was engaging in blackmail and extortion, II) Ludeman disclosed information about Brodkorb’s unemployment claim, contrary to Minnesota statute, and III) Ludeman invaded Brodkorb’s privacy under Minnesota common law by disclosing the unemployment information.

Since Ludeman is an employee of the Senate, the same claims are made against the state.

In the Strib story at the first link, it is reported that Dave Senjem said that the Senate would be defending — and presumably indemnifying — Ludeman; Cal gets a free ride, in other words. But should this be so?

There is a statute, not an especially clear one, frankly, that addresses the defense and indemnification of state employees. Minn. Stat. § 3.736. Subdivision 9 of that statute reads:

Subd. 9.  Indemnification. — [The state shall defend, save harmless, and indemnify any employee of the state against expenses, attorneys’ fees, judgments, fines, and amounts paid in settlement actually and reasonably incurred by the employee in connection with any tort, civil, or equitable claim or demand, or expenses], attorneys’ fees, judgments, fines, and amounts paid in settlement actually and reasonably incurred by the employee in connection with any claim or demand arising from the issuance and sale of securities by the state, whether groundless or otherwise, arising out of an alleged act or omission occurring during the period of employment if the employee provides complete disclosure and cooperation in the defense of the claim or demand and if the employee was acting within the scope of employment. Except for elected employees, an employee is conclusively presumed to have been acting within the scope of employment if the employee’s appointing authority issues a certificate to that effect. This determination may be overruled by the attorney general. The determination of whether an employee was acting within the scope of employment is a question of fact to be determined by the trier of fact based upon the circumstances of each case: [emphasis added]

(i) in the absence of a certification,

(ii) if a certification is overruled by the attorney general,

(iii) if an unfavorable certification is made, or

(iv) with respect to an elected official.

The absence of the certification or an unfavorable certification is not evidence relevant to a determination by the trier of fact. It is the express intent of this provision to defend, save harmless, and indemnify any employee of the state against the full amount of any final judgment rendered by a court of competent jurisdiction arising from a claim or demand described herein, regardless of whether the limitations on liability specified in subdivision 4 or 4a are, for any reason, found to be inapplicable. This subdivision does not apply in case of malfeasance in office or willful or wanton actions or neglect of duty, nor does it apply to expenses, attorneys’ fees, judgments, fines, and amounts paid in settlement of claims for proceedings brought by or before responsibility or ethics boards or committees. [emphasis added]

Hello? Anybody still here? The operative language for our purposes is between the two bold brackets in the first paragraph and the bold language in the second paragraph. The first paragraph sets out the general rule, and the second one includes an important exception. Employees are indemnified, unless . . .   .

Employees are not entitled to defense or indemnity in the case of “malfeasance,” “willful or wanton actions,” or “neglect of duty.” There is a very good reason for this, and it is a thread that runs through the law in many places, including liability insurance law; it’s called a “moral hazard.” Simply stated, we don’t want to protect people from the consequences of their intentionally wrongful conduct. Something they did on purpose in other words.

Here is where you need to go back and look at the complaint’s counts 8, 9, and 10 — excuse me, VIII, IX, and X — against Cal Ludeman individually. Each of the claims made against Cal is an intentional tort. Distinguishing them from, for example, a car accident caused by a state employee in a state car.

In the defamation count, it is alleged that Ludeman acted with “reckless disregard” for the truth in claiming that Brodkorb was a blackmailer and an extortionist.

In the remaining counts, involving the dissemination of the information about Brodkorb’s application for unemployment, it is alleged that Ludeman was the voluntary source of the information: information protected by law.

These are allegations only at this point, but if established, seem clearly to be “malfeasance,” “willful or wanton actions,” or “neglect of duty.”

Let us assume for a moment that you, gentle reader, went to your liability insurance company after being sued will allegations like this against you. You may be assured that your insurer would squawk about defending and indemnifying you, citing the moral hazard exclusions in your policy.

The only difference here is that the insurers are the citizens and the taxpayers of Minnesota.

Update: MNO makes a couple of good points.

Brodkorb probably has a Times v. Sullivan hurdle to overcome on the defamation case. On the other hand, Ludeman wasn’t merely reporting facts when he called Brodkorb a blackmailer and an extortionist; perhaps the claim of maliciousness can be made out if necessary. Hunting Brodkorb down in a public resturant to fire him is also evidence of some bad blood between these two.

Second, there are sovereign immunity issues that undoubtedly lurk in some of the claims brought in the complaint. You can read the statute cited in the story to see more about that.

In thinking about it, perhaps the potentially knotty immunity issues are why the suit was brought in state court, to prevent a federal court from having to certify questions on state law to the Supreme Court of Minnesota and delaying the progress of the litigation.