Jerold J. Mackenzie v. Miller Brewing Company, Robert L. Smith and Patricia G. Best 97-3542 IN THE SUPREME COURT STATE OF WISCONSIN No. 97-3542 JEROLD J. MACKENZIE, Plaintiff-Respondent-Cross-Appellant-Petitioner, v. MILLER BREWING COMPANY, ROBERT L. SMITH, Defendants-Appellants-Cross-Respondents, and PATRICIA G. BEST, Defendant-Cross-Respondent. On Appeal from the Circuit Court of Milwaukee County Hon. Louise M. Tesmer BRIEF OF THE U.S. EQUAL EMPLOYMENT OPPORTUNITY COMMISSION AS AMICUS CURIAE C. GREGORY STEWART General Counsel PHILIP B. SKLOVER Associate General Counsel DENNIS R. McBRIDE LORRAINE C. DAVIS Senior Trial Attorney Assistant General Counsel (State Bar No. 1000430) ROBERT J. GREGORY EQUAL EMPLOYMENT OPPORTUNITY Senior Attorney COMMISSION 310 West Wisconsin Avenue EQUAL EMPLOYMENT OPPORTUNITY Suite 800 COMMISSION Milwaukee, Wisconsin 1801 L Street, N.W. 53203-2292 Washington, D.C. 20507 (414) 297-4188 (202) 663-4059 STATEMENT OF INTEREST The U.S. Equal Employment Opportunity Commission ("Commission" or "EEOC") is the federal agency entrusted with the enforcement of Title VII of the Civil Rights Act of 1964, 42 U.S.C. § 2000e et seq. ("Title VII"). In this case, the plaintiff, Jerold Mackenzie, asserts a claim of intentional interference with contract against Patricia Best, a former subordinate employee of Mackenzie's at Miller Brewing Company ("Miller"). The basis of Mackenzie's claim is that Best made false accusations against Mackenzie in lodging an internal complaint of sexual harassment with Miller officials. The jury found in favor of Mackenzie and awarded $1,500,000 in punitive damages. The jury, however, did not make an award of compensatory damages against Best. The trial court set aside the punitive award, citing the common law rule in Wisconsin that punitive damages may be awarded only where the plaintiff has received an award of compensatory damages for the underlying conduct. The court of appeals affirmed the trial court's decision to set aside the award. See Mackenzie v. Miller Brewing Co., 234 Wis. 2d 1, 608 N.W.2d 331 (Ct. App. 2000). The court noted that Wisconsin case law recognizes a conditional privilege for internal complaints of sexual harassment discrimination. Under that privilege, the complainant may not be held liable in an action brought by the alleged harasser absent evidence of "'ill will or an improper motive towards the plaintiff.'" Id. at 67-68, 608 N.W.2d 331, 358 (quoting Wolf v. F & M Banks, 193 Wis. 2d 439, 462, 534 N.W.2d 877 (Ct. App. 1995)). The court found that Mackenzie's proof in this case fell "short of establishing Best's 'ill will or an improper motive.'" Id. at 68, 608 N.W.2d at 359. The court also ruled that, even if Best's conduct justified a finding of liability on Mackenzie's claim, punitive damages were still not proper under Wisconsin law because the jury awarded no compensatory damages. The court concluded that, "in light of society's interest in encouraging complainants to report sexual harassment, we do not carve out an exception to the [rule precluding] punitive damages in the absence of compensatory damages." Id. at 67, 69-70, 608 N.W.2d at 358-59 (citing the Commission's brief as amicus curiae). The Commission agrees with the court of appeals that subjecting sexual harassment complainants to punitive damages in cases of this nature could have a chilling effect on the willingness of employees to report incidents of sexual harassment in the workplace, thereby undermining the enforcement of Title VII (and parallel state anti-discrimination laws). Because of the importance of the issues raised by this appeal to the effective enforcement of Title VII, the Commission offers its views to this Court as amicus curiae. STATEMENT OF THE ISSUE Whether the court of appeals properly affirmed the decision of the trial court to set aside the award of punitive damages on Mackenzie's claim of intentional interference with contract against Best, where the claim arose from a privileged complaint of sexual harassment discrimination that did not result in any compensable injury to Mackenzie. ARGUMENT THE COURT OF APPEALS PROPERLY AFFIRMED THE TRIAL COURT'S DECISION TO SET ASIDE THE AWARD OF PUNITIVE DAMAGES AGAINST BEST. It Is Essential To The Enforcement Of Title VII That Employees Are Not Chilled From Exercising Their Protected Right To Complain Of Discriminatory Treatment Title VII is a federal statute that broadly prohibits employment discrimination. Relevant to this appeal, Title VII makes it unlawful for a covered employer to discriminate on the basis of sex. See 42 U.S.C. § 2000e-2(a)(1). It has long been recognized that the prohibition in Title VII extends to sexual harassment that is sufficiently "severe or pervasive 'to alter the conditions of [the victim's] employment and create an abusive working environment.'" Meritor Sav. Bank, FSB v. Vinson, 477 U.S. 57, 67 (1986). Title VII is a complaint-driven statute. The statute depends largely on the participation of individual employees for its effective enforcement. See, e.g., EEOC v. Board of Governors, 957 F.2d 424, 431 (7th Cir. 1992). The Commission's primary role under Title VII is to investigate and conciliate complaints of discrimination. The Commission cannot carry out that role unless employees are willing to report incidents of alleged discrimination to the Commission (in the form of an EEOC charge). See 42 U.S.C. § 2000e-5 (setting forth Title VII's pre-suit enforcement procedures). Compliance with Title VII is also achieved when employees oppose unlawful practices by complaining to their employers. Even without the intervention of the Commission, an internal complaint can ferret out incidents of unlawful (or potentially unlawful) conduct, thereby furthering the enforcement objectives of Title VII. To ensure that individuals are not deterred from coming forward with complaints, Title VII defines two forms of protected activity. First, Title VII protects individuals who have filed a charge or otherwise participated in a legal proceeding initiated under Title VII. See 42 U.S.C. § 2000e-3(a). Title VII also protects individuals who have opposed practices made unlawful under Title VII by complaining about those practices to their employers. See id. Title VII forbids an employer from retaliating against an individual who has engaged in protected activity. Title VII makes it unlawful to retaliate even if the individual engaging in the protected activity makes false statements that would otherwise support a claim of defamation under state law. See, e.g., Pettway v. American Cast Iron Pipe Co., 411 F.2d 998, 1003-08 (5th Cir. 1969). Because Congress "has made it clear that it wishes all persons with information about [unlawful] practices to be completely free from coercion against reporting them," Nash v. Florida Indus. Comm'n, 389 U.S. 235, 238 (1967), the law seeks to curb any conduct that has a "chilling effect on employees' assertion of rights." Brock v. Casey Truck Sales, Inc., 839 F.2d 872, 879 (2d Cir. 1988). B. Complaints Of Discriminatory Treatment Are Subject To Well-Recognized Privileges That Limit The Ability Of A Plaintiff To Recover On A State Law Claim Of Tortious Misconduct Because the enforcement of Title VII is dependent upon the willing participation of employees, it is essential that the law ensures, to the fullest extent possible, that employees are not chilled from exercising their protected rights under Title VII. In part, Title VII itself addresses this point by making it unlawful for an employer to retaliate against an individual who has engaged in some form of protected activity. But the protection against unlawful retaliation only goes so far. It prohibits the employer from taking an adverse employment action against a complaining employee. It does not, however, shield the complaining employee from claims of tortious conduct that may be brought against the employee as a result of the discrimination complaint. To buttress the protections of Title VII, a number of States have adopted privileges that insulate a complaining employee, to one degree or another, from claims of defamation or intentional interference with contract asserted against the employee under state law. First, many States provide an absolute privilege for statements made as part of a judicial or administrative proceeding. See Cruey v. Gannett Co., 64 Cal. App. 4th 356, 368, 76 Cal. Rptr. 2d 670, 677 (Cal. Ct. App. 1998); Hinds v. Magna Fabrics, Inc., 1997 WL 309378, *5 (S.D.N.Y. June 9, 1997). Where this privilege applies, an individual may not be sued under state law for statements made in a Commission charge or in a judicial proceeding initiated under Title VII. See Cruey, 64 Cal. App. 4th at 368, 76 Cal. Rptr. 2d at 677; Thomas v. Petrulis, 125 Ill. App. 3d 415, 417-24, 465 N.E.2d 1059, 1061-65 (Ill. App. Ct. 1984). The absolute privilege applies when an individual files a charge with the Commission or participates in some legal proceeding under Title VII. But the law's protection does not stop at those types of formal proceedings. As noted above, Title VII defines protected activity to include activity taken in opposition to unlawful discrimination, activity that often takes the form of an internal complaint. In the sexual harassment context, such an internal complaint may be a necessary prerequisite to maintaining a claim of discrimination in court. See Farragher v. City of Boca Raton, 524 U.S. 775, 807-08 (1998). In recognition of this principle, a number of courts have extended a conditional or qualified privilege to complaints of discrimination even if those complaints do not take the form of a formal charge or legal suit. Courts have long held that in an action for defamation arising out of "an employer-employee relationship," statements made by an employee can support the plaintiff's claim only if the statements were made with "actual malice." E.g., Roy v. Austin Co., 1996 WL 599435, *9 (N.D. Ill. Oct. 16, 1996) (citing Illinois law). This principle clearly applies to an employee's internal complaint of discrimination, since the "[c]ommunication [is] made by a person with an interest or duty to make the communication and sent to a person with a corresponding interest or duty." Olivieri v. McDonald's Corp., 678 F. Supp. 996, 1001 (E.D.N.Y. 1988); see Stockley v. AT & T Information Sys., Inc., 687 F. Supp. 764, 769 (E.D.N.Y. 1988) (qualified privilege applied to communications made during the course of a company's investigation of a sexual harassment complaint); Lambert v. Morehouse, 68 Wash. App. 500, 506-07, 843 P.2d 1116, 1120 (Wash. Ct. App. 1993) (applying conditional privilege to employee's internal complaint of sexual harassment). Courts have extended the same principle to claims of intentional interference with contract. Courts have recognized "a privilege in intentional interference with contract cases when the defendant acts to protect an interest 'which the law deems to be of equal or greater value than the plaintiff's contractual rights.'" Williams v. Shell Oil Co., 18 F.3d 396, 402 (7th Cir. 1994). In such a case, the plaintiff can prevail only by showing that the defendant's conduct was "unjustified or malicious." Id. at 403; see Cruey, 64 Cal. App. 4th at 369, 76 Cal. Rptr. at 678 (internal complaint of sexual harassment conditionally privileged in action for tortious interference with contract; otherwise employees would be chilled from reporting incidents of workplace harassment); Lawson v. Boeing Co., 58 Wash. App. 261, 266-69, 792 P.2d 545, 549-50 (Wash. Ct. App. 1990) (same). Wisconsin courts have followed this general approach. "Wisconsin courts have long recognized the concept of privilege in the area of tortious interference with contract." Liebe v. City Finance Co., 98 Wis. 2d 10, 15, 295 N.W.2d 16, 19 (Ct. App. 1980). Courts have held that "[n]ot all intentional interference with contract is actionable," limiting the tort to cases in which the defendant uses "improper means of inducement," e.g., "coercion by physical force, or fraudulent misrepresentation." Id. at 16, 295 N.W.2d at 19 (citing Pure Milk Prods. Coop. v. National Farmers Org., 64 Wis. 2d 241, 260, 219 N.W.2d 564, 574 (1974)). As this Court has explained, "[t]he defense of privilege has developed under the public policy that certain conduct which would otherwise be actionable may escape liability because the defendant is acting in furtherance of some interest of societal importance, which is entitled to protection even at the expense of uncompensated harm to the plaintiff." Zinda v. Louisiana Pac. Corp., 149 Wis. 2d 913, 922, 440 N.W.2d 548, 552 (1989). In Wolf v. F & M Banks, 193 Wis. 2d 439, 534 N.W.2d 877 (Ct. App. 1995), the Court addressed the precise issue of the applicability of a conditional privilege in a case in which an employee asserted a claim of intentional interference with contract against another employee who had lodged an internal complaint of sexual harassment. The plaintiff in Wolf had been fired from his job because of poor performance. The plaintiff claimed that he was fired because of a co-employee's complaint of sexual harassment. The Court ruled that the harassment complaint could support a claim of intentional interference only upon proof that the employee "acted from ill will or an improper motive towards the plaintiff." Id. at 462, 534 N.W.2d at 885. The Court reaffirmed the principle that "[t]ortious employee conduct which is otherwise actionable may be privileged on public policy grounds if the conduct is in furtherance of some interest of societal importance." Id. at 460, 534 N.W.2d at 885; see also Olson v. 3M Co., 188 Wis. 2d 25, 44-47, 523 N.W.2d 578, 585-86 (Ct. App. 1994) (conditional privilege applied with respect to employer's communications concerning the results of its investigation of allegations of sexual harassment). In Wolf, the Court did not reach the issue of whether the conditional privilege applicable to the complaint of sexual harassment imposed any limitation on the award of punitive damages. The Court stressed, however, the need for ensuring that employees are not chilled from "freely and openly" discussing matters concerning "employee-related problems in the workplace." Wolf, 193 Wis. 2d at 460-61, 534 N.W.2d at 885. We believe that the logic of Wolf extends to the issue of damages raised by this appeal. In complaining about workplace harassment, an employee is furthering an interest of "societal importance." Id. at 460, 534 N.W.2d at 885. At least in cases in which the complaint does not result in any compensable injury to the alleged harasser, there is no justification for subjecting the complaining employee to an award of punitive damages, even assuming that the standard of "ill will" or "improper motive" can be established. To the contrary, there are compelling reasons for insulating the complainant, who has engaged in a form of protected activity under Title VII, from what may be a substantial punitive award. In fact, such a view is consistent with the general approach of Wisconsin courts to the issue of punitive damages. Under Wisconsin law, punitive damages may be awarded, but only in appropriate cases. As a matter of law, punitive damages are not appropriate if the tortious act of the defendant does not give rise to an award of compensatory damages. The rationale for this rule flows from the tort-law principle that "if the individual cannot show actual harm, he or she has but a nominal interest." Jacque v. Steenberg Homes, Inc., 209 Wis. 2d 605, 615, 563 N.W.2d 154, 158 (1997). Since "society has little interest in having the unlawful, but otherwise harmless, conduct deterred, . . . punitive damages are inappropriate." Id. Where the alleged wrong does not produce an actual harm, as evidenced by an award of compensatory damages, there is no basis for a punitive award C. Punitive Damages Are Improper In This Case Based upon the above principles, it is clear that the court of appeals properly affirmed the trial court's decision to set aside the award of punitive damages in this case. Mackenzie claims that Best tortiously interfered with his contractual rights by making false claims of sexual harassment. There is "no proof," however, of "'ill will' or 'improper motive,'" sufficient to overcome the conditional privilege applicable to Best's internal complaint of sexual harassment discrimination. Mackenzie, 234 Wis. 2d at 68-69, 608 N.W.2d at 359 (stressing that, "although Mackenzie disputed certain details of Best's account of [the alleged harassment], he did not disagree with her essential story"). Even assuming, moreover, that the requisite proof for a finding of liability is present in this case, the conditional privilege applicable to internal complaints of sexual harassment discrimination should shield Best from an award of punitive damages, particularly given the absence of any award of compensatory damages against Best. Mackenzie urges that the punitive award against Best can be upheld on the theory that "punitive damages against one defendant may be supported by compensatory damages awarded against another defendant." Br. at 23. In essence, Mackenzie argues that because the jury awarded compensatory damages against Miller and its agent, Robert Smith, on Mackenzie's claims against Miller and Smith for intentional misrepresentation and tortious interference, the jury's punitive award against Best can be sustained. Even assuming that the conditional privilege does not otherwise bar an award of punitive damages, this argument impermissibly conflates Mackenzie's claims against Miller and Smith, on which compensatory damages were awarded, with Mackenzie's claim against Best, on which they were not. In cases of this nature, the plaintiff's real gripe is not with the sexual harassment complainant, who simply reports an incident of sexual harassment (truthfully or otherwise), but with the employer, who acts on that complaint to affect adversely the plaintiff's employment. In almost all cases in which an internal complaint of discrimination leads to some adverse employment action against the alleged harasser, any harm to the harasser will be the result of an intervening action by the employer. In many cases, the employer's action will be justified. In others, it might be argued that the employer acted precipitously and improperly in taking the action. In either case, it is that action by the employer, not the underlying complaint of harassment itself, that causes the tangible injury (if any) to the alleged harasser. An award of compensatory damages for the wrongful conduct of the employer does not support an award of punitive damages against the sexual harassment complainant. CONCLUSION The Court should affirm the trial court's decision to vacate the award of punitive damages against Best. Respectfully Submitted, C. GREGORY STEWART, General Counsel PHILIP B. SKLOVER Associate General Counsel LORRAINE C. DAVIS Assistant General Counsel DENNIS R. McBRIDE ROBERT J. GREGORY Senior Trial Attorney Senior Attorney (State Bar No. 1000430) EQUAL EMPLOYMENT OPPORTUNITY EQUAL EMPLOYMENT OPPORTUNITY COMMISSION COMMISSION 310 West Wisconsin Avenue 1801 L Street, N.W. Suite 800 Washington, D.C. 20507 Milwaukee, WI 53203-2292 (202) 663-4059 (414) 297-4188 July 28, 2000