Hiatt v. Rockwell Intern. Corp.

• Decision Date: 14 June 1994
• Docket Number: No. 93-2300,93-2300
• Parties: 128 Lab.Cas. P 57,704, 9 IER Cases 996 Michael HIATT, Plaintiff-Appellee, v. ROCKWELL INTERNATIONAL CORPORATION, Defendant-Appellant.
• Court: U.S. Court of Appeals — Seventh Circuit

Page 761

26 F.3d 761

128 Lab.Cas. P 57,704, 9 IER Cases 996

Michael HIATT, Plaintiff-Appellee, v. ROCKWELL INTERNATIONAL CORPORATION, Defendant-Appellant.

No. 93-2300.

United States Court of Appeals Seventh Circuit.

Argued Nov. 10, 1993.

Decided June 14, 1994.

Jerome E. McDonald (argued), Campbell, Black, Carnine & Hedin, Mt. Vernon, IL, for plaintiff-appellee.

Bruce R. Alper (argued), Richard A. Saldinger, Vedder, Price, Kaufman & Kammholz, Chicago, IL, Curtis Calloway, John J. Moellering, Lewis, Rice & Fingersh, St. Louis, MO, for defendant-appellant.

Before MANION and KANNE, Circuit Judges, and WILL, District Judge. ^*

MANION, Circuit Judge.

In this diversity action, Michael Hiatt ("Hiatt") sued his former employer, Rockwell International Corporation ("Rockwell" or "the company"), for retaliatory discharge. He claimed that Rockwell discharged him for pursuing his rights under the Illinois Workers' Compensation Act ("the Act"), 820 ILCS 305/1 et seq. (1993). The jury returned a verdict in favor of Hiatt, awarding him $36,188.00 in compensatory damages and $413,812.00 in punitive damages.

On appeal, Rockwell argues, among other things, that the district court erred in refusing to grant its motion for judgment notwithstanding the verdict ("j.n.o.v.") and that, in any event, the award of punitive damages was not supported by an additional showing of malice and willfulness necessary to sustain punitive damages under Illinois law. We agree on both counts and therefore reverse.

I. Background

Rockwell operates a plant in Centralia, Illinois that manufactures fiberglass truck and automobile parts. Production employees in that facility are represented by the United Auto Workers ("the union") which has various collective bargaining agreements with the company. Hiatt began working at Rockwell's Centralia plant on January 25, 1984. He held a succession of production positions during his employment and was covered under the union agreements. Hiatt was terminated by the company in October of 1989.

During the course of his employment Hiatt sustained two injuries to his left knee and developed carpal tunnel syndrome. His first knee injury occurred sometime in 1984 for which he sought and received workers' compensation benefits. He then filed a subsequent claim under workers' compensation for his carpal tunnel syndrome. Rockwell contested this claim, but eventually settled with Hiatt after he was fired. The third claim for workers' compensation arose in October, 1987, when Hiatt re-injured his left knee. The company did not contest this claim at first, but later denied it when Hiatt failed to provide the appropriate medical documentation. The company offered to cover this third injury under its sickness and accident program. Hiatt refused, stating that he was entitled to workers' compensation for this injury. The record indicates that Hiatt took two and a half months medical leave for his first knee injury and took almost a year off for the second knee injury.

After Hiatt had been off work for most of 1988, Hiatt's supervisor, Frank Francyzk, placed Hiatt under surveillance. Francyzk testified that when an employee has been off work for eight months to a year, it is the company's belief that the employee could return to work. He testified that the company occasionally investigates the daily activities of such employees, and that this is done with probably one to three employees per year. ¹

Hiatt returned to work in November of 1988. His knee injury, however, prevented him from returning to his previous assembler job and so the company assigned him to drive a sweeper. That job also proved too hard on his knee and he again went on medical leave. When he was authorized by his doctor to return to work on March 3, 1989, the company provided Hiatt with a series of alternate light duty assignments within the plant. Although he often asked Francyzk about a permanent light duty position that fit his medical restrictions, no such position was available. Hiatt worked without additional medical problems until his termination in October, 1989.

The facts surrounding Hiatt's termination revolve around a provision in one of the collective bargaining agreements between the company and the union. Each contract year employees at the Centralia plant are entitled to a certain level of reimbursement from Rockwell for one pair of safety shoes. To obtain reimbursement, employees must show proof of purchase by either submitting a receipt or bringing in the shoe box. Hiatt had used this procedure many times during his tenure at Rockwell and employed it twice in 1989, once in June and then again in October (representing two different contract years). The events surrounding the October reimbursement gave rise to Hiatt's termination.

On October 20, 1989, Hiatt presented a receipt to Rockwell nurse Pat Thompson who handled shoe reimbursements. Several days later, when Thompson was completing some paperwork, she reviewed Hiatt's reimbursement claim. She testified that the receipt appeared to have been written over and was thin in parts. She became suspicious that the receipt had been altered or falsified and delivered the receipt to Francyzk who in turn notified Sid Williams, Rockwell's industrial relations supervisor. Williams then called Hiatt in to speak with him about the receipt. Hiatt's foreman, Bobbie Harbison (also a good friend of Hiatt's older brother), was at this meeting, along with Francyzk and the union steward, Sherrie Meyer. Williams showed the receipt to Hiatt and asked him if he saw anything unusual about it. Hiatt replied that he did not and denied altering the receipt. Williams disagreed, put Hiatt on twenty-four hour notice, and scheduled another meeting for the next afternoon. ²

Immediately following the meeting, Hiatt raced home and brought back a pair of shoes he said he had purchased. He confronted Francyzk with the shoes outside of the facility. Francyzk, however, told Hiatt that they would talk about it further the next afternoon. Hiatt then went home and, after searching his papers, found what he alleged to be the real receipt.

The next day, October 24, 1989, Hiatt made another attempt at damage control. He went to Williams' office at 9:00 or 10:00 in the morning and attempted to discuss the matter. He brought the shoes and the receipt with him and at that point admitted to falsifying the receipt. Williams, however, stated that this was what the afternoon meeting was for and refused to discuss the matter further. At the meeting, Hiatt produced the shoes, a shoe box, and the new receipt. The store which issued this receipt, however, could not confirm that Hiatt had purchased the shoes there and the shoes contained no markings to establish when or where they were bought. Hiatt admitted that he had falsified the receipt submitted to nurse Thompson on October 20, but asserted that he had nevertheless made a legitimate purchase. In closing argument to the jury he alleged "laziness" and "stupidity" as his reasons for this unfortunate shortcut. Despite these efforts, however, Hiatt was terminated for violating plant rule number 2, falsification of personnel or other records. Hiatt admitted that he was aware of this rule and that he could be fired for violating it. A final follow-up meeting was scheduled for October 26. In that meeting the company confirmed its prior decision and Hiatt remained terminated.

The evidence is undisputed as to the roles played by each person involved in Hiatt's termination. Francyzk, Hiatt's supervisor and his contact in workers' compensation matters, participated in these termination meetings as a scribe. He took notes and prepared a transcript of the proceedings. He was also involved in doing some investigating into Hiatt's claim, calling the shoe stores involved and gathering whatever records of purchases were available. He provided this information to Williams, who was in charge of the proceedings, but did not participate in the decision to terminate Hiatt. Williams, Rockwell's industrial relations supervisor, initiated Hiatt's termination meetings, conducted the meetings on behalf of the company, and participated with Roger O'Neill, Rockwell's personnel manager, in the decision to discharge Hiatt. Neither Williams nor O'Neill were responsible for the administration of workers' compensation claims, and Hiatt's prior or pending claims were not discussed during the termination meetings nor during any other discussions on the decision to terminate Hiatt. In addition, neither Hiatt nor his union representatives alleged retaliation during this process. Although Williams acknowledges that he may have known that Hiatt had filed a workers' compensation claim at some point, he testified that he was unaware of the status, number, or extent of any such claims.

After the termination, the union filed a grievance on Hiatt's behalf, alleging that termination was too severe a penalty where, it was alleged, Hiatt had not intended to defraud the company. Rockwell denied the grievance and the union took no further action on the case.

On August 30, 1990, Hiatt filed suit in Illinois state court, alleging that Rockwell fired him in retaliation for exercising his rights under the Illinois Workers' Compensation Act. Rockwell removed the action to the United States District Court for the Southern District of Illinois and a jury trial commenced on December 7, 1992. On December 9, 1992, the jury returned a verdict for Hiatt in an amount totalling $450,000.00, including $36,188.00 in compensatory and $413,812.00 in punitive damages. Rockwell filed motions for j.n.o.v., a new trial, and remittitur. The district court denied the motions and this appeal ensued.

On appeal, Rockwell alleges that the district court erred in denying the company's motions for j.n.o.v. and a new trial. The company also asserts that the court committed reversible error by prohibiting the company from introducing statistical...