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Vendetta by Microsoft Leads to $11.6 Million Discrimination Verdict

05/12/2014 06:02 pm ET | Updated Jul 12, 2014

When a Fortune 100 corporation pursues an office feud by an employee's ex-girlfriend, the company may get a harsh reprimand, as Microsoft did when a Texas jury found it liable for $11.6 million for employment discrimination.

A civil jury in Austin, Texas, made the wrongful discharge award last week to a senior sales executive who was hounded in a two-year a campaign launched by his boss -- the ex-girlfriend -- and joined by the a Marketing Director, a Regional Sales Director, the National Sales Director and the Vice President of U.S. OEM Windows, Office and Server sales.

Wrongful termination is a growing legal claim that workers are using successfully to hold vengeful companies to account, such as Kraft Foods, Playboy and Staples. Specifically, management retaliation is the leading claim filed against employers, according to statistics by the U.S. Equal Employment Opportunity Commission.

Sex, sleepovers and betrayal

The Microsoft case was a David and Goliath matchup, with two sole practitioner lawyers Paul T. Morin and Roy A. Pollack of Austin, Texas, who did battle for three years in court against the software giant, which had $77 billion in sales last year. The solos faced off against a 235-lawyer firm and a 45-lawyer firm. "The jury delivered a powerful message to Microsoft and the business world that such offensive conduct would not be tolerated in the workplace," Morin said.

The case involves sex, sleepovers and betrayal. Microsoft has not responded to requests for comment.

The target of the corporate hostility was Michael Mercieca, one of the company's top sales people in Austin, who had won a number of awards for sales, long service and customer service. A 17-year veteran of the company, he is a single dad who "lived, breathed and died" Microsoft, according to attorney Pollack.

That changed in 2007, when Lori Aulds became his direct manager as Regional Sales Director U.S. OEM. Previously, she had a sexual relationship with him for several years until he ended it. She told Mercieca, "You have ruined me for sex with my boyfriends," and commented at the office on her sexual relationships with her new boyfriends. According to trial evidence, she insisted that he get involved in her and her new boyfriend's relationship disputes -- even though he told her several times that it made him uncomfortable.

The abuse begins:

The vendetta started in 2009 when Aulds had a sleepover with Tracey Rummel, a marketing consultant whom Microsoft would soon hire. They hatched a plot where Rummel made a false charge that Mercieca had sexually harassed her. Rummel passed on the phony claim to her boss, National Sales Director David Tannebaum and then to his supervisor, Eddie O'Brien, a Microsoft Vice President.

But they didn't take formal action. Instead, the managers created a hostile workplace.

Mercieca noticed he was being treated differently at work -- people would scatter when he came to the water cooler and he was excluded from customer events and conferences. Aulds cut his expense budget, questioned his vacation requests and cut him off from customer communications.

Tannebaum chastised him for missing a deadline by only three hours and criticized him for not doing his job well. He and VP O'Brien called Mercieca's customers trying to dig up dirt about him.

This was a sharp contrast to Microsoft's workplace depiction "What it's like here," which says "We also want you to feel valued and comfortable... Add to this our amazing people and lively atmosphere, and you can see why life at Microsoft is so rewarding."

"It became unbearable at work," attorney Pollock said. After five months of abuse, Mercieca in 2010 filed an internal complaint against his boss, the other managers and Microsoft's Human Resources department, charging them with harassment and discrimination.

The retaliation:

Management responded with fury. Microsoft conducted a bad-faith investigation that found his complaint "unsupported." While the investigation was still ongoing, National Sales Director Tannebaum demanded the investigation end before it was completed and before all of Mercieca's supporting witnesses were contacted, according to trial evidence.

Tannebaum demoted him, gave him the worst possible performance review and cut his bonus and stock options -- even though Mercieca was a star salesman who hit all his sales numbers and was making millions for Microsoft.

Meanwhile, Lori Aulds -- his ex-girlfriend and manager -- was promoted. But the worst was yet to come.

Only 18 days after Mercieca made his internal complaint, now-employee Tracy Rummel filed a formal sexual harassment charge against him. An HR worker who was in on the scheme helped her write the complaint. Through legal discovery, Mercieca's lawyers learned that she had conspired with Aulds to file the trumped-up charge.

Finally, after 16 straight months of abuse, Mercieca sent a letter saying Microsoft had constructively terminated him. Mercieca filed a defamation suit against Tracy Rummel in 2011, also charging Microsoft with wrongful discharge.

The aftermath:

The trial was highly contentious and lasted two weeks. After reviewing more than 600 documents, the jury found that he never harassed Rummel and that she had defamed him. It awarded Mercieca $11,623,064.24 in back pay and benefits.

The case is a lesson in how not to manage employees and conduct company human resources. It goes to show that if employees can get their case before a jury, an individual and two solo lawyers can extract justice from a mammoth corporation.

The case is Michael Mercieca v. Tracy Rummel and Microsoft Corporation, No. D-1-GN-11-001030, District Court of 353rd Judicial District, Travis County, Texas.

Larry Bodine is a lawyer and journalist who is the publisher of the National Trial Lawyers and the former Editor in Chief of Lawyers.com. Readers can follow @Larrybodine on Twitter, on Google+ and on LinkedIn, where he moderates several legal groups.