Tortious Interference with At-will Employment

Page 2: Metamorphosis of Tortious Interference

From Privilege to Propriety: Confusion Creeps In

Mendelson and its "conditional privilege" progeny seem to clearly place the onus on the plaintiff to prove an "improper motive" in order to impose liability on the corporate or third-party actors otherwise insulated by privileges. However, confusion haunts the analysis of those situations where there has been no recognized conditional privilege (thereby triggering application of the section 767 factors) because: 1) the applicable jury instruction (Wis. JI-Civil 2780) does not jibe with relevant case law; and 2) there is a lack of clarity as to which party has the burden of proving that the defendant's acts are "improper."

Jury Instruction Misalignment. The Restatement of Torts definition of tortious interference initially imposed liability on "one who, without a privilege to do so, induces or otherwise purposely causes a third person not to" perform a contract with another.57 The Restatement (Second) of Torts changed the focus to whether the actions are "improper," imposing liability on "[o]ne who intentionally and improperly interferes with the performance of a contract."58 Thus, "privilege" was replaced by "propriety."

Wisconsin Civil Jury Instruction 2780 provides the roadmap for pursuing tortious interference claims. It places the burden on the plaintiff to prove intentional interference, causation, and damages. The instruction provides that the defendant has the burden of proving that his or her actions were "justified" or "privileged," and the suggested verdict question asks whether the defendant's interference was "justified" as opposed to whether it was "improper." Thus, despite the Restatement switch from "privilege" to "propriety" and the fact that a prima facie case for tortious interference requires the interference to be "intentional and improper," Wis. JI-Civil 2780 asks the jury to determine whether the defendant's acts were "justified" or "privileged." This divergence between the instruction language (privilege) and the Restatement reformulation (propriety) fosters confusion.

Burden of Proof Quandary. The Wisconsin Civil Jury Instructions Committee has noted that "[n]o Wisconsin appellate court has determined whether the plaintiff must show 'improper' interference or if the defendant must prove that his or her interference was justified. Nor does the Restatement delineate on whom the burden lies."59 The committee concurred with two Wisconsin federal court decisions, Chrysler Corp. v. Lakeshore Commercial Finance Corp.60 and Federal Pants Inc. v. Stocking,61 to surmise that the "plaintiff establishes a prima facie case by showing an intentional interference with his or her contract by defendant, and then the latter must prove justification for his or her acts."62

In Chrysler, the U.S. District Court for the Eastern District of Wisconsin resorted to Prosser's perception (in 1964) of a general agreement that "the burden of proving that it is 'justified' rests upon the defendant."63 In Federal Pants, the Seventh Circuit Court of Appeals cited to the burden of proof pronouncement in Chrysler. However, just six years later (in 1991), it noted that under Wisconsin law, "the question of which party bears the burden of proving that the defendant's conduct is improper is an unsettled issue of law."64 There has been no express Wisconsin appellate court guidance on the issue since that time.

The instructions committee and courts need to reassess and clarify the issue in view of the shift from privilege to propriety. Perhaps the time has come for an express declaration that the burden of pleading and proving that the defendant's actions are "improper" is on the plaintiff. Several reasons mandate the change. First, placing the burden on the defendant gives the wrong impression that the plaintiff need only show intentional interference to impose liability. With all due respect to the Civil Jury Instructions Committee, under present Wisconsin law a plaintiff does not establish a prima facie case by showing merely an intentional interference with his or her contract. Interference alone does not establish the tort. The interference also must be "improper."65 Placing the burden on the plaintiff also would create consistency with Mendelson, where the supreme court took note of case law stating that "[t]he plaintiff must establish that instead of acting within the privilege, the defendant acted outside of it, that is to say, from an improper motive."66

Placing the burden on the defendant to prove that his or her acts were "proper" has been criticized by some commentators because it creates an inherent presumption that the defendant is liable.67 Additionally, Prosser (who the Chrysler court relied upon to intimate that the burden was on defendant) noted 20 years later - after the issuance of the Restatement (Second) of Torts - that the new Restatement (Second) formula "might be read, as some of the cases imply, to put the burden on the plaintiff in the first instance to show impropriety, and it is no doubt an improvement when so read."68

The apparent trend in other jurisdictions is to place the burden on the plaintiff to prove impropriety.69 Although Wisconsin courts have not expressly imposed the burden of proving impropriety on the plaintiff, the Wisconsin Court of Appeals appears to have tacitly adopted such an approach in Mackenzie.70 In reversing the $100,000 judgment against Mackenzie's supervisor, the court concluded that "Mackenzie failed to provide any evidence of improper conduct that would constitute tortious interference with his prospective contract."71

As discussed above, in cases where no conditional privilege exists, the burden should be on the plaintiff, using the Restatement section 767 factors, to show that the defendant's interference was "improper." In the conditional privilege cases, the message is simple: if the plaintiff cannot prove "improper motive," the plaintiff will lose.

Former Employer Immunity: References to Potential Employers

Terminated employees commonly request that their former employer provide a reference to potential future employers. Wis. Stat. section 895.487 affords the employer providing the reference immunity from "all civil liability that may result from providing that reference" unless the employee can prove by clear and convincing evidence that: 1) the employer knowingly provided false information in the reference, or 2) the employer made the reference maliciously or in violation of Wis. Stat. section 111.322 (prohibiting employment discrimination).

Those who suspect that their former employer has wrongfully thwarted their attempts to gain new employment face the practical obstacle of discovering the exact nature and substance of the former employer's communicated information. Potential employers may be reluctant to provide specific details. Obviously, "you do not possess the qualifications we seek" is more diplomatic than "your former employer said you are a dishonest, unreliable thief." Yet, if the employee is able to discover specific information that rebuts the immunity presumption of section 895.487, the employer faces exposure to a claim for tortious interference with prospective contract.

Conclusion

Mark R. Hinkston, Creighton 1988 cum laude, practices business litigation with Knuteson, Powers & Wheeler S.C., Racine. He is admitted to practice in Wisconsin, Missouri, Kansas, and Colorado. You can reach him at mhinkston@kpwlaw.com.

In view of the freedom and flexibility afforded by at-will employment, courts are "reluctant to interpose the judicial branch between employers and employees."72 A tortious interference claim should not be brought merely to circumvent the general unavailability of a wrongful discharge claim. Discharged at-will employees should resort to a tortious interference claim only when their termination actually was triggered by "improper motive" in conditional privilege cases or "impropriety" in the others. They should be ready and able to prove impropriety, despite the uncertainty over the burden of proof, because even if a conditional privilege applies, success depends upon a showing of improper motive.

The cases discussed here highlight the infrequency of success. However, that infrequency and the judicial reluctance "to interpose" should not lull corporate decision-makers, reporting coemployees, or whistle-blowing third parties into a false sense of security. The "conditional privileges" afforded to corporate actor targets are not licenses to act with impunity.73 The penalty can be great when any of these accused intermeddlers (whether in or out of the company) let personal motives or vendettas influence decisions relating to at-will employees.

Endnotes

1 Mackenzie v. Miller Brewing Co., 2000 WI App 48, 234 Wis. 2d 1, 608 N.W.2d 331, aff'd, 2001 WI 23, 241 Wis. 2d 700, 623 N.W.2d 739.

2 See Strozinsky v. District of Brown Deer, 2000 WI 97, 93, 237 Wis. 2d 19, 614 N.W.2d 443 (noting that the Wisconsin Supreme Court is reluctant to "second guess employment or business decisions, even when those decisions appear ill-advised or unfortunate").

3 See Mackenzie, 2001 WI 23 at 26 (noting Mackenzie "seeks to shoehorn a tort cause of action into his at-will contractual relationship with Miller").

4 Id., 2001 WI 23 at 29.

5 Mendelson v. Blatz Brewing Co., 9 Wis. 2d 487, 491, 101 N.W.2d 805, 807 (1960). See also Kumpf v. Steinhaus, 779 F.2d 1323, 1324 (7th Cir. 1985) (noting the plaintiff "was an employee at will, but even at-will employment is contractual and therefore potentially the basis of a tort action").

6 See Frandsen v. Jensen-Sundquist Agency Inc., 802 F.2d 941, 947 (7th Cir. 1986).

7 See Porcelli v. Joseph Schlitz Brewing Co., 397 F. Supp. 889, 892 (E.D. Wis. 1975), aff'd, 530 F.2d 980 (7th Cir. 1976) (stating "no claim of tortious interference with economic relations can be made against Schlitz, since a defendant's breach of his own contract with the plaintiff is not actionable").

8 Wolf v. F & M Banks, 193 Wis. 2d 439, 457, 534 N.W.2d 877, 884 (Ct. App. 1995). Although emotional distress reasonably expected to result from the interference is normally recoverable on a tortious interference claim, the Wisconsin Court of Appeals has left the door open to the possibility that "it may be inappropriate to award [emotional distress damages] in a tortious interference with contract claim against a coemployee" (because of possible Worker's Compensation Act preemption). Id.

9 Restatement (Second) of Torts § 774A (1979).

10 In Wisconsin, because a contract or prospective contract is essential, there is no remedy for interference with mere "business relations." See Shank v. William R. Hague Inc., 16 F. Supp. 2d 1038, 1044 (E.D. Wis. 1998), aff'd, 192 F.3d 675 (7th Cir. 1999).

11 Pure Milk Prod. Coop. v. Nat'l Farmers Org., 90 Wis. 2d 781, 796 n. 10, 280 N.W.2d 691, 698 n. 10 (1979); Charolais Breeding Ranches Ltd. v. FPC Sec. Corp., 90 Wis. 2d 97, 105-06, 279 N.W.2d 493, 497 (Ct. App. 1979).

12 Restatement (Second) of Torts § 766 (1979).

13 Restatement (Second) of Torts § 766A (1979). See Wisconsin Power & Light Co. v. Gerke, 20 Wis. 2d 181, 121 N.W.2d 912 (1963); Magnum Radio Inc. v. Brieske, 217 Wis. 2d 130, 139-40, 571 N.W.2d 377, 380 (Ct. App. 1998).

14 Restatement (Second) of Torts § 766B (1979). See Cudd v. Crownhart, 122 Wis. 2d 656, 658-59, 364 N.W.2d 158, 160 (Ct. App. 1985).

15 9 Wis. 2d 487, 101 N.W.2d 805 (1960).

16 Id. at 491, 101 N.W.2d at 807.

17 Id. at 492-93, 101 N.W.2d at 808.

18 Id. at 493, 101 N.W.2d at 808.

19 Lorenz v. Dreske, 62 Wis. 2d 273, 287, 214 N.W.2d 753, 760 (1974).

20 Brunswick Corp. v. E.A. Doyle Mfg. Co., 770 F. Supp. 1351, 1366 (E.D. Wis. 1991).

21 Mackenzie, 2000 WI App 48, 234 Wis. 2d 1, 608 N.W.2d 331, aff'd, 2001 WI 23, 241 Wis. 2d 700, 623 N.W.2d 739.

22 Mackenzie asserted the following claims: 1) intentional misrepresentation against Miller and his supervisor; 2) tortious interference with contract against his supervisor (see notes 53-56, infra); and 3) tortious interference with contract against his coemployee.

23 Mackenzie appealed to the Wisconsin Supreme Court, but his tortious interference claims were not the subject of the appeal. 2001 WI 23 at 29. The supreme court addressed only the misrepresentation claims, holding "that there is not a cause of action in Wisconsin for intentional misrepresentation to induce continued employment." 2001 WI 23 at 30.

24 Wolf v. F&M Bank, 193 Wis. 2d 439, 534 N.W.2d 877 (Ct. App. 1995).

25 Mackenzie, 2000 WI App 48 at 95.

26 Id. at 96. Some courts have refused to allow coemployee tortious interference claims arising out of personnel decisions under any circumstances, even those involving the malicious exchange of information. See, e.g., Sheppard v. Freeman, 79 Cal. Rptr. 2d 13, 17 (Cal. Ct. App. 1998) (holding that "an employee or former employee cannot sue individual employees based on their conduct, including acts or words, relating to personnel actions" because the interest in allowing free speech relative to personnel decisions "without the threat of debilitating litigation outweighs the risk that a few employees will act maliciously and go undetected by their employers").

27 Johnson v. Aetna Life Ins. Co., 158 Wis. 56, 147 N.W.2d 32 (1914).

28 Id. at 60, 147 N.W. at 33.

29 Augustine v. Anti-Defamation League of B'nai B'rith, 75 Wis. 2d 207, 249 N.W.2d 547 (1977).

30 Liebe v. City Finance Co., 98 Wis. 2d 10, 295 N.W.2d 16 (Ct. App. 1980).

31 Id. The court noted that "the mere statement of existing facts, or assembling of information in such a way that the party persuaded recognizes it as a reason for breaking the contract, is not enough [to impose tortious interference liability], so long as the defendant creates no added reason and exerts no other influence or pressure by his conduct." Id.

32 Goerke v. Vojvodich, 67 Wis. 2d 102, 105, 226 N.W.2d 211, 213 (1983).

33 Restatement (Second) of Torts § 772 cmt. c (1979). See also Joseph P. Caulfield & Assocs. v. Litho Prods. Inc., 155 F.2d 883 (7th Cir. 1998).

34 Farr v. Gruber, 950 F.2d 399 (7th Cir. 1991).

35 Hale v. Stoughton Hosp. Ass'n, 126 Wis. 2d 267, 376 N.W.2d 89 (1985).

36 See Qasem v. Kozarek, 716 F.2d 1172 (7th Cir. 1983); Dovin v. Beaver Dam Emergency Medicine S.C., 43 F. Supp. 2d 1027 (E.D. Wis. 1999).

37 See Dovin, 43 F. Supp. 2d at 1034; Olson v. 3M Co., 188 Wis. 2d 25, 523 N.W.2d 578 (Ct. App. 1994).

38 See Wilcox v. Niagara of Wis. Paper Corp., 965 F.2d 355, 365 (7th Cir. 1992).

39 See Foseid v. State Bank of Cross Plains, 197 Wis. 2d 772, 789 n. 10, 541 N.W.2d 203, 210 n. 10 (Ct. App. 1995).

40 Restatement (Second) of Torts § 766 comment r (1979).

41 W. Page Keeton, Prosser and Keeton on The Law of Torts §129, at 988 (5th ed. 1984).

42 See Liebe v. City Finance Co., 98 Wis. 2d 10, 295 N.W.2d 16 (Ct. App. 1980).

43 Porcelli v. Joseph Schlitz Brewing Co., 397 F. Supp. 889, 893 (E.D. Wis. 1975), aff'd, 530 F.2d 980 (7th Cir. 1976).

44 Id.

45 Kaufman v. Grant-Crawford Co-op Oil Co., Dist. IV Ct. App., No. 81-539 (Jan. 26, 1982) (unpublished decision).

46 See Harman v. La Crosse Tribune, 117 Wis. 2d 448, 344 N.W.2d 536 (1984).

47 See Kumpf, supra note 5, 779 F.2d at 1325.

48 Id.

49 Id. (stating "[t]he 'rules of the game' are important in deciding what sorts of acts are privileged.... The rule of this game is that [plaintiff] was an employee at will and had no right to stay on if his board wanted him gone").

50 See Wis. JI-Civil 2780. See also Liebe, supra note 42, 98 Wis. 2d at 5, 295 N.W.2d at 19 (Ct. App. 1980). See also Sparks v. Waukesha Bearings Corp., Dist. II Ct. App., No. 87-1127 (May 4, 1988) (unpublished decision) (noting in Liebe, "we held that the specific privileges set forth at secs. 768-773 control, where applicable, over the factors listed in sec. 767").

51 Restatement (Second) of Torts § 767 (1979).

52 Restatement (Second) of Torts § 767 comment a (1979).

53 2000 WI App 48, 234 Wis. 2d 1, 608 N.W.2d 331.

54 2000 WI App 48 at 65-74.

55 Id. at 69.

56 Id. at 71.

57 Restatement of Torts § 766 (1939).

58 Restatement (Second) of Torts § 766 (1979).

59 Wisconsin Civil Jury Instructions Committee comment to Wis. JI-Civil 2780.

60 Chrysler Corp. v. Lakeshore Commercial Fin. Corp., 389 F. Supp. 1216 (E.D. Wis. 1975).

61 Federal Pants Inc. v. Stocking, 762 F.2d 561 (7th Cir. 1985).

62 See supra note 59.

63 Chrysler, 389 F. Supp. at 1221.

64 Railway Express Agency Inc. v. Super Scale Models Ltd., 934 F.2d 135, 140 (7th Cir. 1991).

65 See Liebe, supra note 42, 98 Wis. 2d at 15, 295 N.W.2d at 19 (Ct. App. 1980).

66 Mendelson, 9 Wis. 2d at 492, 101 N.W.2d at 808.

67 See, e.g., Dan B. Dobbs, Tortious Interference with Contractual Relationships, 34 Ark. L. Rev. 335, 346 (1980); Elisa Masterson White, Comment, Arkansas Tortious Interference Law: A Proposal for Change, 19 U. Ark. Little Rock L.J. 1:81, 81 (1997).

68 W. Page Keeton, Prosser and Keeton on The Law of Torts §129, at 983-84 (5th ed. 1984).

69 See Della Penna v. Toyota Motor Sales, U.S.A., Inc., 902 P.2d 740, 746-47 (Cal. 1995) (stating that "[o]ver the past decade or so, close to a majority of the high courts of American jurisdictions have imported into the economic relations tort ... a rule that requires the plaintiff in such a suit to plead and prove the alleged interference was either 'wrongful,' 'improper,' 'illegal,' 'independently tortious' or some other variant on these formulations"). See also Mason v. Wal-Mart, 333 Ark. 3, 969 S.W.2d 160 (1998) (stating the decision "to require the plaintiff to prove improper conduct in a tortious interference with contract claim has placed Arkansas in line with a majority of jurisdictions in the United States").

70 Mackenzie, 2000 WI App 48, 234 Wis. 2d 1, 608 N.W.2d 331.

71 Id. at 64, 234 Wis. 2d at 48, 608 N.W.2d at 350. See also Dovin, supra note 36, 43 F. Supp. 2d at 1035 (stating "plaintiff has failed to present any evidence upon which a reasonable jury could find that the conduct of [the defendants] improperly interfered with her contract with [the Clinic]") (emphasis added).

72 Mackenzie, 2001 WI 23 at 13.

73 See Bachand v. Connecticut Gen. Life Ins. Co., 101 Wis. 2d 617, 631 n. 3, 305 N.W.2d 149, 155 n. 3 (Ct. App. 1980) (stating "persons in the employment arena, although relatively unrestrained in their contractual relations, may not completely disregard the rights of the persons with whom they deal").