Wednesday, October 14, 2020

Henry Ford And Business Judgment

The United States Court of Appeals for the Sixth Circuit reversed  the wire fraud convictions of three defendants due to the admission of undercover tape recordings of the one defendant and others expressing racist and sexist views while watching a football game

Before homing in on the legal particulars, we begin with two commonsense questions: Does the fact that Mark Hazelwood used utterly repulsive language in private make it more likely that he and his cohorts committed wire fraud? No. Does it make it more likely that a jury would convict? Yes. With this broad view of the recordings’ probable real-life effect, we turn to the legal justifications offered for their admission.

The court rejected any basis for admission

Moreover, the recordings do not rebut Hazelwood’s argument that he was a “good businessman.” Having a bad set of personal beliefs did not make it more likely that Hazelwood made bad business decisions. Take Henry Ford, for example. After creating a simple, reliable car that the average American worker could afford, the Model T, he developed the assembly line mode of production that revolutionized the automobile industry. Ford was also a rabid antiSemite, publishing his views in his hometown newspaper, the Dearborn Independent, after purchasing the paper. Yet this character flaw did not impede Ford’s acuity in industrial arenas or affect the success of Ford Motor Company. Like Ford, Hazelwood’s personal views are despicable, but they do not correlate with his business judgment. Which raises another point: Hazelwood did not make these comments in public; he made them after hours, during a private corporate retreat, with trusted corporate compadres. And, they certainly do not advance the evidentiary route to the ultimate fact, the commission of wire and mail fraud. Being a racist and a chauvinist did not make it more probable that Hazelwood would commit wire fraud. And eliciting testimony that it would be dumb to risk a company’s reputation by committing fraud did not put bigotry or sexism in “issue.”


The profoundly racist and sexist content of these recordings is so antithetical to the sensibilities of decent people, that we are “left in grave doubt” that anyone could scrub all traces clean from one’s mind regardless of the quantum of evidence presented. These convictions also cannot stand.

The dissent of Circuit Judge Donald would find the trial court did not abuse its discretion

Even setting aside any conceptual and practical difficulties of the proposition that the recordings contain purely personal beliefs and that said personal beliefs, which attach to and follow a person, do not, or could not, surface and have bearing on the same person’s business decisions, the majority unfairly characterizes the context of the lake house recordings and misses the government’s means of countering the testimony elicited by Hazelwood.

The majority persuasively writes that Hazelwood’s comments were not made “in public” but “after hours, during a private corporate treat, with trusted corporate compadres.” The meeting, however, was no more private or personal than any other business meeting or retreat held open to a company or certain employees of a company; it certainly was not a vacation or event of pure leisure and recreation. Moreover, the presence of leisure, recreation, or other informalities or practices (like the use of profanity and the consumption of alcohol) does not necessarily turn a business retreat into something more akin to a vacation. The record reflects that such informalities in the conducting of business were not unheard of within Pilot, particularly in meetings with upper management, as explicitly shown through the lake house meeting. Important here is that the company retreat was, in effect, a business meeting held at the lake house of a Pilot sales employee, attended by a number of direct sales employees only, and instituted for the express purpose of conducting a Pilot management meeting and planning a larger sales meeting and training. Despite the use of profanity and jokes, the consumption of alcohol, or the playing of music and sports entertainment, the attendees of the meeting conferred and otherwise communicated about Pilot’s future training efforts, sensitivity training, human resources department, board, and the like, throughout. Moreover, Hazelwood was the company president while the other attendees were his subordinates, and, as the record reflects, Hazelwood’s presence, statements, and actions served as significant indicia of acceptable conduct to these subordinates.

Judge Donald would find no abuse of discretion on several grounds

What matters here is that the evidence was relevant, as rebuttal evidence; properly admitted in substance and form, even if it is character evidence or risks findings based on propensity; and the probative value of the evidence is not substantially outweighed by the risk of unfair prejudice. For these reasons, I dissent.

(Mike Frisch)

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