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Appeals court overturns ‘Seinfeld’ case

Former Miller Brewing Co. sales executive Jerold J. Mackenzie will not recover the $25-million-plus damages award in the lawsuit that came to be known as the “Seinfeld” case.Last week, in a 2-1 decision, the District I Court of Appeals concluded that Mackenzie’s claim that Miller had intentionally misrepresented his standing within the company, thereby inducing him to continue his employment, is not actionable in tort. And even if it were, the court ruled, Mackenzie didn’t prove those elements.Mackenzie worked for Miller from 1974-93, working his way up the corporate structure until he attained what the company called “Grade Level 14” status.In 1987, Miller underwent a reorganization of its corporate management structure, with Mackenzie believing that his status had not been affected. In 1989, his position was downgraded, along with over 800 others, but these employees were grandfathered so that as long as they held these spots, their pay and benefits were unaffected.In 1992, Mackenzie was downgraded to Level 13, with the loss of the right to participate in the company’s stock options program. During that same year, he was overlooked for a promotion, with his supervisor recommending against him.The next year, Patricia Best, a co-worker complained that Mackenzie had commented on numerous occasions about a “Seinfeld” episode that contained numerous thinly veiled references to the female sexual anatomy. And back in the late ’80s, Miller paid a $16,000 harassment claim to Mackenzie’s former secretary, although at that time, he had denied the most of allegations. Mackenzie was fired in 1993 after Best’s complaints for “poor management judgment.”A Milwaukee jury awarded him $6.5 million for compensatory and $18 million in punitive damages for his claim that Miller intentionally misrepresented his standing within the company, thereby inducing him to remain under its employ.

Imposing duty would be unworkable

A majority of the District I appeals court panel — Judges Charles Schudson and Ralph Adam Fine — reversed that judgment, however. Schudson, citing Tatge vs. Chambers & Owen, 219 Wis. 2d 99 (1998), wrote that the state’s high court had expressly rejected the proposition that, exclusive of an employment contract, employers have an independent duty to their employees to refrain from misrepresentation.Turning to the elements of misrepresentation, the court ruled that there was no duty upon an employer to disclose a decision of this nature. While honesty is a virtue, the court said, there are other deterrents to employers to prevent them from intentionally deceiving employees, such as the possibility of contract claims or criminal penalties. Market forces are also powerful in such instances, since companies that engage in such tactics risk embarrassing public exposure, as well as the loss of its best employees.Moreover, creating such a duty would “cause massive disruption in the workplace, spawning claims with no reasonable stopping point,” Schudson wrote. He also cited with approval the amicus brief of Wisconsin Manufacturers & Commerce, which argued that creating this duty would then have to be a “two-way street,” so that employees must also disclose when they are considering quitting or are interviewing for other positions and so on.“We conclude that the creation of an employer’s duty to disclose information potentially affecting an employee’s decision to continue employment would undermine sound public policy,” Schudson wrote. “It would reduce the at-will employment flexibility that is so valuable to both employers and employees. It would be virtually impossible to implement and enforce. It would leave both employers and employees forever guessing at the limits of their responsibility and potential liability.”Although the majority had ruled against Mackenzie on the legal theory, it nonetheless engaged in what it termed a “painstaking review” of the trial record to find evidence supporting his intentional misrepresentation claims, but found none.

Interference judgment inverted

As for Mackenzie’s claim for tortious interference with a prospective contract against his supervisor, who had recommended that he not be promoted, the majority reversed that judgment as well.People other than just this defendant had expressed reservations about his suitability for the job, the court noted. And the court again cited with approval the position of Wisconsin Manufacturers & Commerce, reasoning that supervisors must be free to offer “honest, candid evaluations of co-employees without raising the risk of personal exposure.”With regard to the jury’s finding that Best engaged in tortious interference with Mackenzie’s employment relationship, the court reversed that as well. The jury had awarded him zero dollars in compensatory damages and $1.5 million in punitive damages from Best. The court reversed the punitives award, observing that the absence of compensatory damages precludes punitives. Mackenzie additionally argued that Miller had wrongfully discharged him based upon the allegations of sexual harassment. Although he was an “at-will” employee, Mackenzie reasoned that, since the allegations were unsubstantiated, he falls within the “public policy” exception for termination of at-will employees.The trial court, Milwaukee County Judge Lousie Tesmer presiding, had granted summary judgment against Mackenzie. The appellate court affirmed that decision, noting that he had not shown that he had been discharged for refusing to violate a constitutional or statutory provision, or that he was fired for complying with a fundamental and well-defined legal duty. Mackenzie’s contentions about Miller’s intent or public policy considerations did not sway the majority.Presiding Judge Ted E. Wedemeyer Jr. wrote a heated dissent to the opinion. Wedemeyer pointed to instances in the record that he said sustained the jury’s findings on the intentional misrepresentation claim.Looking to the holding on intentional misrepresentation in the employment context, Wedemeyer stated that Tatge had addressed a negligent misrepresentation situation, which was a narrow situation that declared that a breach of contract case was not actionable in tort, and it did not examine inducements for an employee to continue his employment.“Cases dealing with the unilateral volunteering of corporate strategy and insider information are distinct from being affirmatively untruthful about the answer to a specific request,” Wedemeyer wrote. “This case is not about a duty to disclose. It is about the absolute duty not to lie!”

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