Unjustified “For Cause” Termination Leads to Significant Jury Award in Workplace Defamation Claim

The Appellate Court for the First District of Illinois recently upheld a jury verdict awarding the plaintiff $2 million dollars in compensatory damages and $6 million dollars in punitive damages for a workplace defamation claim.  Leyshon v. Diehl Controls North America, Inc., 2010 WL 5480668 (Ill. App. 1st Dist. Dec. 27, 2010).

The plaintiff in Leyshon v. Diehl Controls was the former President of his company and was working under an employment contract which allowed for termination only for cause.  Unfortunately, despite that Mr. Leyshon had done nothing wrong and certainly not engaged in any conduct which qualified as just cause, the defendants decided that they wanted to terminate his employment.  Rather than simply terminating the contract and paying Mr. Leyshon the benefits he would have received under its terms, the company decided to falsify its justification for Mr. Leyshon’s termination.  Thus, on February 1, 2006, Christoph Weigand, a member of Diehl’s supervisory board, announced to Mr. Leyshon that he was fired.  Mr. Leyshon asked Mr. Weigand why he was being fired and Mr. Weigand responded that he did not have to give him a reason, but that he was terminated “for cause under the terms of [his] employment agreement.”   Mr. Leyshon 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?”  Mr. Weigand answered by merely saying “yes.”

Because Mr. Leyshon had not engaged in gross insubordination, misconduct, negligence or willful violation of the law, he filed a lawsuit alleging that, among other unlawful conduct, Diehl and Mr. Weigand had engaged in defamation per se when they stated that his termination was “for cause.”  The jury found in his favor and awarded him $8 million in damages.  However, the defendants appealed that ruling, arguing that the “innocent construction rule” barred Mr. Leyshon’s defamation claim.  The defendants also challenged the compensatory and punitive damages awarded as excessive.

The innocent construction rule requires a court to look at allegedly defamatory statements “in context and give the words of the statement and any implications arising from them, their natural and obvious meaning.”  However, the Appellate Court explained that the innocent construction rule does not mean a court must find words to be innocent “simply because the allegedly defamatory words are capable of an innocent construction.”  Instead, the court must give the words their natural and obvious meaning and interpret words “as they appeared to have been used and according to the idea they were intended to convey.”

Considering these rules, the Leyshon court held that the defendants’ statement that Mr. Leyshon was terminated “for cause” was incapable of innocent construction.  The court explained that, given the context in which the comment was made (“the sudden termination of [Mr. Leyshon’s] employment and Weigand’s confirmation that the reasons for [Mr. Leyshon’s] termination were gross insubordination, gross misconduct, gross negligence and willful violation of the law”), the statement could “not reasonably be construed as having an innocent meaning as a matter of law.”

Significantly, the court upheld the $2 million dollars in compensatory damages.  The court acknowledged that it can be difficult to determine when “presumed” damages (the type of damages awarded for workplace defamation per se) are excessive.  However, the court explained that because Mr. Leyshon had presented proof of his damages, the award was justified.  That proof included evidence that others had learned of the defamatory statement, Mr. Leyshon’s testimony and his wife’s regarding his emotional distress and humiliation, as well as the testimony of a recruiter who expressed his belief that others in the industry likely knew of the “for cause” termination and that as a recruiter he would never recommend an executive for hire if he had been terminated for cause from previous employment.

The $6 million dollars in punitive damages was also upheld.  In that analysis, the court considered that there was evidence of a premeditated scheme to harm Mr. Leyshon as opposed to mere recklessness on the defendants’ part.  Additionally, the court considered the fact that the defamatory statement had not been published to a limited audience, but instead many people seemed to have learned of the for cause termination.  The court explained that the defendants’ conduct was reprehensible given that they had used the power of their corporation to humiliate and destroy the Mr. Leyshon’s reputation to avoid paying him what he was due.  Finally, the court considered the ratio between the compensatory and punitive damages awarded.  In light of all of these factors, the court found that the $6 million dollar award should stand.

This decision constitutes a significant victory for employees whose contractual right to employment is terminated for trumped up and false “cause.”  In light of this holding and the significant damages at stake, companies may be more careful before alleging that grounds for termination exist as a means of avoiding their contractual obligations.  Exaggerating (or, worse, fabricating) cause for termination may just amount to workplace defamation.

If you feel that your employer has subjected you to workplace defamation, please contact our office.