"If You Can’t Say Something Nice" Dep’t: Government Contractor Sues Former Employee For ‎Claiming Contractor Is Under Investigation

I don’t know where you are when you’re reading this.  Thanks to the Internet, you could be anywhere from Abu Dhabi to Zagreb. 

But if you’re in the same place I am – Washington, D.C. – you likely know a few things about defense contracting.  First, it’s big business – over $1.5 trillion in military contracts have been let since October of 2006.  Second, as much as Washington is a “company town” that relies for its economic life, in large part, on the federal government itself, this area also relies on the substantial presence of several huge companies that specialize in contracting with the military – including household (Pentagon-hold?) names like Lockheed Martin, Raytheon, General Dynamics, BAE Systems, Science Applications International Corporation, CACI, and Northrup Grumman. If you know those two things, then you know a third: those contracts are zealously guarded and fought over. 

That’s the context for a dispute between Tifco Industries and its former sales manager, Mike Carrillo.  According to Tifco, Carrillo – once he went to work for a competitor – started badmouthing Tifco to military contracting officers, telling them Tifco was under investigation.  Much of Tifco’s work is from the military, so it couldn’t take Carrillo’s statements lying down. 

In response, Tifco sued Carrillo in Texas state court, alleging Carrillo’s statements defamed it.  Clearly in a tiff, Tifco raises the curious allegation that Carrillo also stole from it, because the company reimbursed his travel expenses while he was out selling something else for another company – pre-paid legal services, ironically enough – when he should have been selling Tifco’s maintenance kits and other products to the military. 

Background

Tifco is a Texas company that makes maintenance products and repair kits.  Carrillo became its Military Sales Manager – a significant position, given the military’s substantial presence in Tifco’s revenue stream – in 2009.  Carrillo traveled to bases around the country, extoling the benefits of Tifco’s products to contracting officers.  At the same time, according to Tifco’s complaint, Carrillo was moonlighting as a salesman for a pre-paid legal service company.  The complaint says Carrillo “falsified time and expense reports” and misrepresented to Tifco that it was working for it – while he was really working for the pre-paid company, and traveling on Tifco’s dime. 

Ultimately, Carrillo and Tifco parted ways, and Carrillo went to work for Kimball Midwest, which sells products that compete with Tifco’s.  Tifco’s complaint paints an interesting picture of Carrillo’s work for Kimball, alleging he “went on a nationwide tour of defamation and lies directed at Tifco.”  Even though an investigation into Tifco’s contracting practices had been resolved in 2009, Carrillo – in 2011 – allegedly told contracting officers at bases around the country that Tifco was still under investigation.  Carrillo also told these officers that they could “face military discipline or demotion” for ordering Tifco products through the military’s electronic catalog system. 

Defamation Claim: Rare; Suits Between Contractors and Others: Not So Much

A defamation suit by a government contractor against one of its employees is relatively rare, although defamation cases in the government contracting industry as a whole are not.  There are several cases of former employees suing government contractors for defamation.  For example, in Becker v. Philco, the Fourth Circuit Court of Appeals held that a government contractor is immune from suit for statements that may be defamatory when it reports to the government information that causes an employee to lose his security clearance.  And, in Shoemaker v. Northrup Grumman Co., a former employee's claim against a contractor that fired him for illegally accessing Air Force computers was dismissed because the contractor's allegedly defamatory statements to the Air Force were either "true, irrelevant, or not defamatory."  

Of course, government contractors occasionally sue one another for alleged defamatory statements.  In an odd twist of biting the hand that feeds them, government contractors have also sued the government itself for defamation.  They also seem comfortable suing the media. 

This is not to say defense contractors don’t go to court to protect themselves from their former employee’s conduct.  They do – but usually they don’t allege defamation, they allege that the former employee is giving trade secrets to another contractor based on one theory or another.   

Tifco’s use of the defamation claim against Carrillo is, therefore, somewhat unique, even if the concept of a dispute between a defense contractor and a former employee – like disputes between employers and employees generally – is not nearly as rare. 

We’ll be curious to see how this turns out.  As the plaintiff in a defamation suit, Tifco bears the burden of proof on its claim.

In the meantime, Tifco v. Carrillo provides a practical reminder for both employers and employees: like your grandmother probably told you, if you can’t say anything nice, don’t say anything at all.  Badmouthing a former employer – even if it doesn’t result in a defamation suit – isn’t a wise strategy.  Badmouthing a former employee, on the other hand, can be a violation of privacy rights and may result in, at least, more trouble than it’s worth (more discussion of that point will come in future posts).