The Mission of the Manhattan Institute is
to develop and disseminate new ideas that
foster greater economic choice and
individual responsibility.

The American Lawyer
September, 1997

Sued If You Do, Sued If You Don't

Roger Parloff

Last July our erstwhile sister company, Court TV, took some flak in the press for airing a trial concerning an employment dispute that it promoted as the "Seinfeld Viewer Firing" case. Critics charged that Court TV was unduly hyping the case's tenuous connection to Seinfeld. They were missing the real story. Whatever Court TV's motives were, it happened to be airing a truly extraordinary case. Let's recap the facts. In March 1993 the Milwaukee-based Miller Brewing Company fired Jerold Mackenzie, a manager with 19 years of service, after co-worker Patricia Best complained to her supervisor that Mackenzie had made her feel terribly uncomfortable. The event that triggered her distress was Mackenzie's having recounted to Best the plot of the previous night's episode of Seinfeld. This was the episode in which comedian Jerry Seinfeld forgets his date's first name and can only remember that it sounds like some part of the female anatomy. Ultimately, it turns out that the date's name was Dolores, rhyming with—at least in the minds of Seinfeld's writers—"clitoris." Since Mackenzie, in retelling the plot, had not wanted to utter the word "clitoris" out loud, he showed co-worker Best a photocopy of a page from the dictionary including the definition of the word. Best complained of her discomfort, and Mackenzie was subsequently called into the company's law library to discuss the incident with Miller's in-house counsel and its outside counsel at Milwaukee's Quarles & Brady—who had, unbelievably, already discussed the incident in a meeting with Miller's then-CEO, Warren Dunn.

Ultimately, the company decided to fire Mackenzie. Mackenzie then sued the company, one of his supervisors, and the complaining co-worker, Best, in state court in Milwaukee. In July, after three years of litigation culminating in a three-week trial, Mackenzie won a $26.6 million jury verdict, consisting of about $6.6 million in lost future earnings, and $20 million in punitive damages. At press time the defendants had not yet filed their post-trial motions seeking to overturn or reduce the verdict. What are we to make of this weird case? At the most obvious level it could be seen as an epitome of how vigilant and puritanical some employers think they must now be in policing their employees' speech and conduct in the workplace. Imagine, pundits will say, that Miller was so spooked about getting slapped with a harassment suit that it fired a veteran employee merely for describing to a colleague an episode of the most popular show on network television today. But that characterization, while not entirely false, is not entirely fair either. To begin with, a month before the Seinfeld incident, Mackenzie had left Best a strange voicemail message saying that he had been out drinking, was "going night-night," that he thought she was a "special" employee, and that he wanted to get off the phone before he got "too mushy." Best also claimed that when Mackenzie recounted the Seinfeld episode to her, he had done so in a strange manner—allegedly staring, for instance, at her crotch. (He denied having done so.) In addition, Miller, in firing Mackenzie, claimed that this incident was just the latest in a series in which Mackenzie had demonstrated poor managerial skills or judgment, including a 1989 incident that had led a different female subordinate to complain about Mackenzie and file a sex harassment charge against Miller, which the company had settled for $16,000 in 1990. So saying that Mackenzie was fired for recounting a Seinfeld episode is, arguably, misleading. After all, if my intonation and manner were salacious enough, I could probably harass a woman while reading her the Bill of Rights. Nevertheless, the case is still very puzzling. Putting aside whether the Seinfeld incident could have constituted harassment under the civil rights laws—or whether Miller reasonably feared that it could—what was Mackenzie's cause of action? If a private employer wants to enforce an absurdly stringent harassment policy that exceeds what any court would require of it, why can't it? When I first began looking into the case—reading Court TV's daily logs of the trial—it appeared that Mackenzie was suing for wrongful discharge. That seemed to be the gist of the messages being conveyed to the jury by Mackenzie's skillful trial attorney, Gerald Boyle, of Milwaukee's Boyle, Boyle & Smith. (Boyle is the renowned criminal lawyer who represented serial murderer Jeffrey Dahmer, though this was his first civil jury trial.) But if the company wanted to fire Mackenzie—a white male, right?—why couldn't it? Was there some provision in his employment contract that he could only be fired for just cause? No, there wasn't. Mackenzie was an employee at will, the trial judge had ruled before trial, meaning that Miller could fire him for any reason or for no reason. Miller also paid him the usual severance for an employee of his tenure: a full year's salary plus benefits—about $110,000. Accordingly, the trial judge had dismissed Mackenzie's wrongful discharge claim before trial. Yet Mackenzie had still won a $26.6 million verdict against Miller. How? Was it a defamation suit? Mackenzie did allege that, after his firing, he had unsuccessfully sought employment from 71 potential employers. He speculated that many of these employers had shied away from him because they had heard that his firing had something to do with a sexual harassment allegation. But, no, Mackenzie wasn't suing for defamation. Indeed, Miller—like most well-counseled employers today—doesn't dare provide other employers with any negative (or positive) information about former employees, precisely to avoid such defamation suits. Give up? The enormous verdict in this case was actually awarded on three tort theories, two of which have nothing to do with his firing and, so far as I can tell, nothing to do with any loss of future earnings—though that was the measure of damages. The first cause of action arises from a restructuring at Miller that occurred in 1987. Mackenzie claimed that his supervisor had assured him at the time that the restructuring would not affect him. But in 1989, as a follow-up to the restructuring, Miller did, in fact, downgrade about 700 jobs at the company, including Mackenzie's, although it also grandfathered the salaries and benefits of incumbent employees filling those positions. Thus, Mackenzie's job fell from a salary grade level 14 to a level 13, though the downgrade had no immediate effect on him because his compensation was unaffected. Now, remember, Mackenzie had no legal basis for challenging the downgrade itself. The tort—called misrepresentation—is that his then-supervisor, Robert Smith, allegedly did not promptly explain to Mackenzie that his position had been downgraded and grandfathered. (Smith says he thinks he did explain it.) Mackenzie alleged that he, therefore, did not learn of the downgrade until August 1992—five years after the restructuring and three years after the downgrade—when the company announced that it would be eliminating its grandfathering policy, meaning that, as of January 1993, Mackenzie would start feeling some effects from the earlier downgrade. Though Mackenzie did not quit upon learning the bad news, and did not claim to have passed up any job offers between the 1987 restructuring and 1992, he sued Miller and supervisor Smith in 1994 on the theory that they had deprived him of the right to make an informed choice, back in 1987 or 1989, about whether to look for other job opportunities. The jury accepted this theory and ordered Miller to pay Mackenzie $6.5 million in compensatory damages and $18 million in punitive damages, while it ordered the supervisor, Smith, to pay $1,500 in compensatory and $500,000 in punitive damages. Understand? Neither do I. Next, Mackenzie sued the supervisor, Smith, for allegedly having advised the company against promoting him to an attractive (level 15) position in 1992. Though the supervisor testified that he thought Mackenzie was unsuited to the new position and that, in any event, he had had nothing to do with the decision whether to appoint Mackenzie to it, the jury found that the supervisor had, in fact, manifested opposition to Mackenzie's promotion. Accordingly, it found that he had committed another tort: tortious interference with Mackenzie's prospective contract. It ordered Smith to pay Mackenzie $100,000 for that injury. So an employee can apparently now sue his supervisor for not recommending him for a promotion, even without alleging that the supervisor's conduct was motivated by some sort of discriminatory animus prohibited by federal, state, or municipal law. Supervisor Smith's tort was that he thought Mackenzie didn't deserve the post—and the jury thought he did! Finally, Mackenzie also brought another "tortious interference" claim against Best, the woman who had complained about the Seinfeld incident. Mackenzie maintained that Best used words like "dickhead" around the office, that she therefore couldn't have really been upset by the Seinfeld incident, and that she had only complained about it because she wanted Mackenzie fired. (Best and her supervisor, by the way, both testified that she had only asked the supervisor for advice about how to handle Mackenzie's conduct, and that she had actually pleaded with the supervisor not to report Mackenzie. The supervisor, however, had feared violating corporate policy if he failed to report a possible instance of sexual harassment.) The jury found that Best had tortiously interfered with Mackenzie's employment contract, and ordered her to pay Mackenzie $1.5 million in punitive damages. The lesson, apparently, is that if an employee complains to a supervisor about a colleague's conduct, and the supervisor and the company's attorneys agree with the complaining employee and, therefore, take lawful action to punish the offensive conduct, the complaining employee may incur $1.5 million in liability. So this suit really never should have been promoted as the Seinfeld Viewer Firing case at all. It should have been promoted as the Twilight Zone case. Though Mackenzie v. Miller Brewing Company dumbfounded me, it would not have raised a hair in either eyebrow of Walter Olson. Olson's seen it all, and the highlights are now contained in his engaging, witty, and provocative new book, The Excuse Factory: How Employment Law Is Paralyzing the American Workplace. Olson, a senior fellow at the Manhattan Institute (and not a lawyer), provides a comprehensive examination of the unintended consequences of our ever-expanding network of well-intentioned employment laws. In a nutshell, he concludes that the laws result in an unnecessary diminution of productivity, competence, and liberty at the workplace. He reports, for instance, about schools that unwittingly hire teachers with histories of sexual advances toward students, since the teachers' previous employers—fearing defamation suits—will not reveal that history when solicited for job references. Similarly, he reports that the National Transportation Safety Board has "identified four airplane crashes (with 72 fatalities) in which pilot error had been preceded by the failure of the reference process to disclose a poor job history." Olson also tells us about the police officer who was fired for lying on his job application—concealing five prior hospitalizations for mental illness—but then won reinstatement because state disability laws barred applicants from being probed about mental illness. And then there's the case in which a federal judge struck down a qualifying test for firefighters, which had required applicants to run up staircases and perform mock rescues of adult-sized dummies under time constraints. The physically demanding test had an illegal disparate impact on women, the judge found, and could not be justified as a bona fide job qualification since, among other problems, the evidence that speed was important in firefighting was merely "anecdotal." Olson's critique of the contemporary sued-if-you-do, sued-if-you- don't world of employment law has already garnered favorable reviews in Newsweek, Fortune, and The Wall Street Journal and appears destined to have as much impact as his controversial 1991 polemic against plaintiffs lawyers, The Litigation Explosion. Because of the importance of the issues he explores and the broad likely impact of the book, we invited two employment discrimination practitioners—one from the plaintiffs side and one from the defense side—to read and comment on it. Lynne Bernabei of Washington, D.C.'s Bernabei & Katz and Mark E. Brossman of New York's Chadbourne & Parke kindly obliged, and their reviews begin on page 45. As you might suspect, Bernabei and Brossman differ sharply—and emotionally—in their assessments of the book. Though Olson's book is encyclopedic in detailing the problems with employment laws today, he is reserved and even cagey when it comes to recommending reforms. In the final chapter he speaks nostalgically about the good old days of the true at-will employment contract—i.e., when private employers could fire employees even for bad reasons, like the employer's racism—but he does not quite ever come out and clarify precisely how much of the current statutory scheme he would be willing to dispense with. There is no comparable problem divining the views of law professor Richard Epstein of the University of Chicago, whom I interviewed for a Q&A that appears on page 74. As legal academia's most prominent and outspoken libertarian thinker, Epstein would simply take a sword to the Gordian knot of contemporary employment law (and, indeed, to much of the rest of the state and federal legislation passed this century). As he explains in the interview—and at greater length in his 1992 book Forbidden Grounds: The Case Against Employment Discrimination Laws—Epstein favors repeal of all of the discrimination laws, including race, at least to the extent that they affect competitive, private sector industries. He believes, in essence, that the market can now be trusted to ensure that employees' human capital will not be undervalued on inappropriate grounds. "Employment laws have become the great battleground of the 1990s," he told me in June. "The tragedy is that nobody understands what the basic mistake is. It's not that harassment or discrimination is good. It's that private responses rather than government responses are the appropriate way to deal with it, and that if individual workers do not like the level of grief that they get, we want to keep a labor market that's open enough and free enough that you can quit one job and, in a thriving economy, get another." Though I suspect that few readers will accept Epstein's argument in toto—especially as applied to race or sex discrimination—they may find it difficult to refute a thesis that undergirds both Olson's and Epstein's works. Conducting business under the ever-present threat of exceedingly costly, bitter, and unpredictable litigation depresses the productivity of employers and limits the liberty, job opportunities, and wage levels of all employees. Accordingly, the attempt to provide legal redress for every injustice that can befall an employee may ultimately lead to worse long-term results for society than allowing some injustices—even some serious injustices—to go uncorrected by the legal system. Professor Epstein says that "it's extremely difficult to run a business if anytime you make a decision there are two or more individual employees who could challenge you on three or more grounds each." If you think he's exaggerating, tell me what your prudent, lawyerly advice would now be to a company like Miller upon learning that an employee like Patricia Best had a complaint about an employee behaving like Jerold Mackenzie. And remember, of course, that you have to give your advice not yet knowing which one of them's going to retain Gerald Boyle.

©1997 The American Lawyer

Visit The Excuse Factory webpage



Home | About MI | Scholars | Publications | Books | Links | Contact MI
City Journal | CAU | CCI | CEPE | CLP | CMP | CRD | ECNY
Thank you for visiting us.
To receive a General Information Packet, please email
and include your name and address in your e-mail message.
Copyright © 2009 Manhattan Institute for Policy Research, Inc. All rights reserved.
52 Vanderbilt Avenue, New York, N.Y. 10017
phone (212) 599-7000 / fax (212) 599-3494