Walmart Hit with $34.7 Million Defamation Verdict in Workers' Comp Case

A San Bernardino County jury awarded former Walmart truck driver Jesse Fonseca $34.7 million after finding the retail giant defamed him when terminating his employment on accusations of workers' compensation fraud. The verdict, reached on November 15, 2024, includes $25 million in punitive damages, reflecting the jury’s view of Walmart's misconduct.

Fonseca, 61, a 14-year employee at Walmart's Apple Valley Distribution Center, sustained serious injuries in a 2017 collision when his truck was rear-ended by another semi-truck. Following medical recommendations, he was placed on modified duty with restrictions prohibiting lifting, pushing, pulling, bending, stooping, and driving.

While on workers' compensation leave, Fonseca took two previously planned family trips—a camping excursion to Malibu and an anniversary cruise—without objection from Walmart or its third-party claims administrator, Sedgwick. Surveillance arranged by Sedgwick captured Fonseca performing minimal activities seemingly contrary to his work restrictions, such as briefly bending while setting up his RV and driving the vehicle for a short duration.

Walmart’s internal fraud department investigated the incident but concluded Fonseca had not committed fraud. However, crucial findings exonerating Fonseca were omitted when the case was transferred to Walmart’s Ethics Department. Without the full context, the Ethics Department classified his actions as "intentional dishonesty," a violation of Walmart’s integrity policy, resulting in his immediate termination in March 2018.

Fonseca sued Walmart for defamation, asserting the company's internal communications labeling him dishonest were maliciously false. The jury agreed, concluding Walmart conducted a reckless investigation in "conscious disregard for the truth," leading to substantial reputational harm and emotional distress for Fonseca.

Punitive damages are monetary awards intended to punish defendants for particularly egregious behavior and to deter similar conduct in the future. To award punitive damages, the jury must find clear and convincing evidence that the defendant acted with malice, oppression, or fraud. In this case, the jury's $25 million punitive damages verdict indicates that it found Walmart's actions not only negligent but malicious and conducted with a deliberate disregard for Fonseca's rights and reputation.

Amanda Deering White, an Orange, California workers' compensation attorney, provided insight on the implications of the verdict: "This significant jury award serves as a critical reminder for employers that the manner in which workers' compensation claims are investigated and handled carries substantial legal risk. Employers must ensure that investigations are thorough, unbiased, and based on complete information. Transparency and proper documentation are key to avoiding allegations of defamation or wrongful termination. Conversely, injured employees should recognize that they have strong protections against retaliatory actions, and this verdict underscores their right to legal recourse when employers act recklessly or maliciously in workers' compensation matters."

Attorneys David M. deRubertis, Mohamed Eldessouky, and Maria Garcia represented Fonseca, while Walmart was represented by David Yudelson and David Crane of Constangy Brooks Smith & Prophete LLP. The jury deliberated for approximately two-and-a-half hours following the three-week trial before returning the sizable verdict.

Walmart had contended Fonseca genuinely violated his work restrictions, insisting the termination was justified and truthful. The jury unanimously disagreed on most points, highlighting Walmart’s flawed processes and decision-making as central factors in its determination.