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Wallace C. Leyshon v. Diehl Controls North America

December 27, 2010

WALLACE C. LEYSHON, PLAINTIFF-APPELLEE,
v.
DIEHL CONTROLS NORTH AMERICA, INC. AND CHRISTOPH WEIGAND, DEFENDANTS-APPELLANTS.



Appeal from the Circuit Court of Cook County. Honorable Dennis J. Burke,Judge Presiding. No. 06 L 3745

PRESIDING JUSTICE HALL delivered the opinion of the court:

The plaintiff, Wallace C. Leyshon, brought suit against the defendants, Diehl Controls North America, Inc. (DCNA) and Christoph Weigand,*fn1 alleging their breach of an employment contract, violation of the Illinois Wage Payment and Collection Act (820 ILCS 115/1 et seq. (West 2006)), and defamation. Following trial, the jury returned a verdict for the plaintiff and awarded damages. On the defamation claim, the jury awarded the plaintiff $2 million in compensatory damages and $10 million in punitive damages. The trial court denied the defendants' posttrial motion but granted their request for a remittitur, reducing the punitive damages award to $6 million.

On appeal, the defendants challenge only the finding of liability on the defamation claim and the amount of the damages awarded on that claim. They contend that: (1) under the innocent-construction rule, there was no defamation per se, as a matter of law, (2) "invited defamation" was a complete defense to the defamation per se claim; (3) the compensatory damages award was excessive, and (4) the punitive damages award was excessive under Illinois common law and violated due process.

BACKGROUND

I. Facts

Diehl AKO Stiftung & Company, KG (Diehl), located in Germany, is the parent company of DCNA. The plaintiff had been president of DCNA since 2001. The plaintiff's employment was pursuant to a written contract. His most recent contract was effective January 1, 2005, through December 31, 2007. The contract was signed on behalf of Diehl by Dieter Neugebauer, chairman of the supervisory board of Diehl, and Dr. Weigand, a member of the supervisory board.

Relevant to the defamation allegations, the contract provided as follows:

"The Company shall have the right to immediately terminate this Agreement and employee's employment for 'cause' without prior notice. 'Cause' shall include gross negligence, gross neglect of duties, gross insubordination and willful violation of any law applicable to the conduct of the Company's business and affairs."

On February 1, 2006, Dr. Weigand informed the plaintiff that he was terminated for cause.

A. Liability Evidence

The parties do not dispute the facts surrounding the utterance of the words or the words themselves the plaintiff alleged defamed him. Those facts are summarized below.

On February 1, 2006, the plaintiff was in his office at DCNA. At 11 a.m., Heinz Ruediger Kraemer, chief financial officer of DCNA, entered the plaintiff's office accompanied by Dr. Weigand, the new chairman of DCNA. Almost immediately, Dr. Weigand announced to the plaintiff that he was fired. When the plaintiff asked the reason, Dr. Weigand replied that he was not required to give a reason. Citing the investment of his time and his career in DCNA, the plaintiff continued to press Dr. Weigand for a reason for his termination. Again, Dr. Weigand told the plaintiff he did not have to tell him the reason.

After summoning John Dugan, a part-time human resources employee, to serve as a witness, the plaintiff requested that Dr. Weigand repeat what he had stated to the plaintiff. Dr. Weigand repeated that the plaintiff was terminated. When the plaintiff then asked what he was terminated for, Dr. Weigand responded, "'for cause.'" When the plaintiff expressed incredulity, Dr. Weigand stated, "'You are terminated for cause under the terms of your employment agreement.'" The plaintiff responded, "'You are telling me that you are firing me for gross insubordination, for gross misconduct, for gross negligence and willful violation of the law?'" Dr. Weigand responded, "'Yes'" and would not elaborate further. When the defendant asserted he had rights as an employee, Dr. Weigand informed him that Diehl was fully committed to this decision and would commit its "ample" resources to contest any steps the plaintiff might take. The plaintiff was ordered to vacate his office immediately.

B. Damages Evidence

The plaintiff testified as follows. After his termination, he returned home and informed his wife that he had been terminated for cause. She became extremely upset. The plaintiff found it very humiliating to have to tell his teenage son that he had been fired for cause. Two weeks later, he attended an employees dinner at which "nobody could look [him] in the eye."

The plaintiff explained that he took his reputation very seriously because it was the basis of his career in the industry in which he worked. The plaintiff's reputation impacted how effective he was in business and whether he appealed to business people. Given his experience, the companies he had worked for and how he was able to attract people to work for him, his reputation was very valuable. He was shocked by his termination because there was no basis for it. He was very humiliated to be terminated for cause. The view in the United States is that termination for cause means it is felony based or involves sexual misconduct.

According to the plaintiff, the alleged defamatory statement impacted his standing in the business community and his ability to find work. He contacted several of the companies he had done business with while at DCNA, as well as several competitors. Despite repeated attempts to make contact with people at these companies, he received no response from any of them. Even the people he had regularly communicated with prior to his termination did not return his calls.

Kathleen Leyshon, the plaintiff's wife, testified as follows. Over the years, Mrs. Leyshon had been involved with the plaintiff's various business ventures. From her attendance at industry meetings and conventions, she observed that the plaintiff was highly regarded among the leaders in his industry. The plaintiff was honored with the Illinois Entrepreneur of the Year award, as well as a supplier award from Maytag, which was viewed as beneficial to DCNA.

According to Mrs. Leyshon, when the plaintiff returned home after his termination, he did not look well and was quite pale. When he told her the reasons for the termination, she was shocked and found it unbelievable. After building up a very good reputation, the whole experience of being terminated and having to remove his belongings from his office was extremely traumatic, upsetting and humiliating for the plaintiff. At a party the plaintiff and she organized to say goodby to the employees, many of them expressed concern for the plaintiff and his family.

The plaintiff also presented evidence that his termination was the result of the defendants' premeditated scheme to rid themselves of the plaintiff. The plan required that the plaintiff be fired for cause, even though the defendants knew there was no basis for doing so. Mr. Neugebauer testified that Dr. Weigand wanted the plaintiff terminated for cause in order to avoid having to pay him the sums he would be entitled to under his contract. In addition, the plaintiff had voiced concern to Dr. Weigand over certain of Diehl's tax practices.

Richard Sbarbaro, an executive search management consultant, testified regarding the effect termination for cause had on the plaintiff's ability to find employment. Based on Mr. Sbarbaro's experience, the plaintiff would not be considered for a comparable position because of the implications of the termination for cause. Termination for cause referred to gross misconduct, significant financial malfeasance, sexual harassment or drug use on the job. Mr. Sbarbaro would never recommend a candidate who had been terminated for cause to a prospective employer.

Based on his 30 years of experience and his sensitivity to such issues, Mr. Sbarbaro believed that the plaintiff's termination for cause was known in the market place. He explained that it was very difficult to maintain confidentiality in business. The fact that the plaintiff's significant contacts refused his telephone calls signaled that the plaintiff's termination for cause was known outside of DCNA. In addition, it had been 2 1/2 years, and the plaintiff had yet to secure gainful employment.

According to the defendants' witnesses, following the plaintiff's termination from DCNA, DCNA customers were told that the plaintiff was no longer with DCNA but were not told that the plaintiff was discharged for cause. While searching for a replacement for the plaintiff, Dr. Weigand told a recruiter that the plaintiff had been terminated suddenly because, while sales were increasing, profits were not.

The jury returned a verdict finding in favor of the plaintiff and against the defendants on the claim of defamation per se.*fn2

The jury awarded the plaintiff $2 million in compensatory damages and $10 million in punitive damages. The trial court denied the defendants' posttrial motion but granted a remittitur of the punitive damages award and reduced the award to $6 million. The defendants appeal.

ANALYSIS

I. Innocent-Construction Rule

The defendants contend that the denial of their motion for a judgment n.o.v. was error because, under the innocent- construction rule, Dr. Weigand's statement, "'You are terminated for cause under the terms of your employment agreement,'" was not actionable.*fn3

A. Standard of Review

The preliminary construction of an allegedly defamatory statement is a question of law. Therefore, our review is de novo. Tuite v. Corbitt, 224 Ill. 2d 490, 511, 866 N.E.2d 114 (2006).

B. Discussion

"A statement is defamatory if it tends to harm a person's reputation to the extent that it lowers that person in the eyes of the community or deters others from associating with that person." Tuite, 224 Ill. 2d at 501. Illinois recognizes five categories of statements that are defamatory per se, two of which are implicated in this case: statements imputing an inability to perform or want of professional integrity in performing employment duties and statements imputing a lack of ability or that otherwise prejudice a person in his profession or business. Tuite, 224 Ill. 2d at 501-02. Even if a statement falls into one of the per se categories, the statement will not be actionable if it is reasonably capable of an innocent construction. Tuite, 224 Ill. 2d at 502.

In Green v. Rogers, 234 Ill. 2d 478, 917 N.E.2d 450 (2009), our supreme court explained the innocent-construction rule as follows:

"Under the 'innocent-construction rule,' a court must consider the statement in context and give the words of the statement, and any implications arising from them, their natural and obvious meaning. [Citation.] Indeed, this court has emphasized that the context of the statement is critical in determining its meaning, as a given statement may convey entirely different meanings when presented in different contexts. [Citation.] If the statement may reasonably be innocently interpreted, it cannot be actionable per se. [Citation.] Stated differently, 'a statement "reasonably" capable of a nondefamatory interpretation, given its verbal or literary context, should be so interpreted. There is no balancing of reasonable constructions ***.' [Citation.] At the same time, when the defendant clearly intended and unmistakably conveyed a defamatory meaning, a court should not strain to see an inoffensive gloss on the statement. [Citation.]" (Emphasis in original.) Green, 234 Ill. 2d at 499-500, quoting Mittelman v. Witous, 135 Ill. 2d 220, 232, 552 N.E.2d 973 (1989), abrogated on other grounds in Kuwik v. Starmark Star Marketing & Administration, Inc., 156 Ill.2d 16, 619 N.E.2d 129 (1993).

In Skopp v. First Federal Savings of Wilmette, 189 Ill. App. 3d 440, 545 N.E.2d 356 (1989), the reviewing court held that "for cause" was not actionable because the words were capable of an innocent construction. The plaintiffs' employment at First Federal was terminated. In speaking with members of a placement firm hired by First Federal to assist the plaintiffs, First Federal's vice-president stated that the plaintiffs had been terminated for cause. According to the plaintiffs, in the savings and loan industry, the term "for cause" meant that the plaintiffs had engaged in misconduct. The trial court granted summary judgment to the defendants, and the plaintiffs appealed.

The reviewing court affirmed the summary judgment. The court determined that the plaintiffs failed to establish that the placement firm members had any specialized knowledge of the savings and loan industry so as to understand the industry meaning of "for cause." The court further found that, even if the industry definition was applicable, besides serious instances of misconduct, the definition of "for cause" contained in the federal rules and procedures listed several reasons for termination, which did not impart unfitness or want of integrity and which would not prejudice someone in his profession. Skopp, 189 Ill. App. 3d at 446.

Noting that courts in Kansas and New York had found the statement terminated "for cause" to be actionable, the court in Skopp agreed with the court in Terry v. Hubbell, 22 Conn. Supp. 248, 167 A.2d 919 (1960), explaining as follows:

"[In Terry], it was held that the statement was not libel per se because '[t]aken in their "natural and ordinary meaning," the words "discharged for cause" mean no more than that the plaintiff was released or dismissed from an office or employment for some undisclosed circumstance which operated to produce that effect.'" Skopp, 189 Ill. App. 3d at 445, quoting Terry, 22 Conn. Supp. at 256, 167 A.2d at 923.

The plaintiff maintains that the result in Skopp must be viewed in light of subsequent Illinois decisions applying the innocent-construction rule. In Bryson v. New America Publications, Inc., 174 Ill. 2d 77, 672 N.E.2d 1207 (1996), our supreme court emphasized that the innocent construction must be reasonable. The court explained that the innocent-construction rule did not apply simply because the allegedly defamatory words were "capable" of an innocent construction. The court explained further as follows:

"In applying the innocent construction rule, courts must give the allegedly defamatory words their natural and obvious meaning. [Citations.] Courts must therefore interpret the allegedly defamatory words as they appeared to have been used and according to the idea they were intended to convey to the reasonable reader. [Citation.] When a defamatory meaning was clearly intended and conveyed, this court will not strain to interpret allegedly defamatory words in their mildest and most inoffensive sense in order to hold them nonlibellous under the innocent construction rule." Bryson, 174 Ill. 2d at 93.

In Bryson, the court found that it need not determine whether the term "slut" always implied unchastity. Given the context of the statement, the court refused to find that the defamatory word must be innocently construed as a matter of law. Bryson, 174 Ill. 2d at 94. More recently, the decision in Green, reemphasized the importance of the context in which the alleged defamatory words were uttered. In Green, the supreme court found that the statement accusing the plaintiff, who had served as a little league coach and manager, of misconduct and stating that he abused players, coaches and umpires, was capable of an innocent construction, given the very broad meanings of "misconduct" and "abuse," as well as the context in which they were used. Green, 234 Ill. 2d at 501-02. Since the abuse and misconduct statements were then followed by assurances that the plaintiff would be free to assist with activities involving his son's team, the court found the statements reasonably capable of an innocent construction. Green, 234 Ill. 2d at 503.

In contrast to Skopp, where as long as a word or statement could be innocently construed, it was nonactionable under the innocent-construction rule, under Bryson and its progeny, just because a word may have an innocent meaning does not require that it be innocently constructed. The context in which the words or statement were uttered also must be considered. In the present case, the context in which Dr. Weigand's statement was made was the sudden termination of the plaintiff's employment and Dr. Weigand's confirmation that the reasons for the plaintiff's termination were gross insubordination, gross misconduct, gross negligence and willful violation of the law.

We conclude that, given the context in which Dr. Weigand's statement that the plaintiff was terminated for cause was made, the statement cannot reasonably be construed as having an innocent meaning as a matter of law.

II. The Invited-Defamation Defense

The defendants contend that, as the plaintiff "invited" Dr. Weigand's statement and even summoned a witness to hear it, the invited-defamation defense applies and completely defeats the plaintiff's claim. The defendants concede that they did not raise this defense until their posttrial motion. The defense is forfeited as explained below.

In Thornton v. Garcini, 237 Ill. 2d 100, 928 N.E.2d 804 (2009), our supreme court held that the defendant forfeited his right to raise the single-recovery rule to bar damages for emotional distress by raising the rule for the first time in a posttrial motion. Thornton, 237 Ill. 2d at 112. The defendant had numerous opportunities to raise the rule: as an affirmative defense, in pretrial motions in limine, in a motion for a directed verdict, and during the jury instructions conference. Due to the defendant's failure to raise the issue before the entry of the jury's verdict, ...


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