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