"In January 2008, Jarretta Hamilton began teaching at Southland Christian School. Sometime in January 2009, she and her then-fiancé conceived a child. They got married the next month. On Sunday, April 5, 2009, Hamilton met with John and Julie Ennis, Southland's administrator and assistant administrator, to tell them that she was pregnant and to ask for maternity leave during the next school year. During that meeting, she admitted that she had conceived the child before getting married. Southland fired Hamilton the following Thursday, purportedly because she had sinned by engaging in premarital sex and, as John Ennis put it, 'there are consequences for disobeying the word of God.'"
Strangely, with this record, the district court granted summary judgment (on her federal and state civil rights claims) on the ground that "Hamilton had not established a prima facie case because she had not produced evidence of a nonpregnant comparator who was treated differently." (Hard to picture what such a comparator would look like, in this context.)
The Eleventh Circuit reverses. The panel begins by noting the recent Hosanna-Tabor decision, but then observing that the employer failed to preserve this argument. While the employer argued the defense on summary judgment, the district court rejected that argument in favor of reaching the merits. Then, on appeal, the defendant mentioned the defense just once in its response brief: "The Court determined that the ministerial exception did not apply in this case." The panel holds that "Southland abandoned that exception as a defense by failing to list or otherwise state it as an issue on appeal."
The filing of notice of supplemental authority about Hosanna-Tabor decision did not preserve the issue, either: "a party cannot inject new, nonjurisdictional issues into an appeal by filing unrequested supplemental letters or briefs." At any rate, the panel observed that the employer's briefing in court of appeals included a "sentence claiming a right 'to terminate nonminister employees,'" essentially judicially admitting the defense away.
On the merits, the panel holds that the employer's alleged admission that the termination was motivated by the pre-marital pregnancy was enough to support a trial without more. "[S]he does not have to show a comparator if she can show enough noncomparison circumstantial evidence to raise a reasonable inference of intentional discrimination, . . . and she has done that." In addition to the above -
"She testified at deposition that, after she told the Ennises about her pregnancy but before she told them she had conceived before getting married, John Ennis 'put his head back and he said, we feared something like this would happen.' Hamilton testified that John Ennis told her that she was going to have to 'take the year off' because replacing a teacher taking maternity leave after the school year had started was hard to do. She also testified that it appeared to her the Ennises primary concern was her request for maternity leave. According to Hamilton's deposition testimony, at some point during the meeting, she asked John Ennis: '[W]hat is the issue here? Is it because of the coverage? Or is it because of the premarital conception? And he said both reasons.'"
There was also conflicting testimony about whether the employer's avowed reason for her termination was legitimate. The decisionmaker Ennis testified at deposition that, "even though Hamilton committed the sin of premarital sex, '[i]f, in fact, she would have said to us I'm sorry that I've sinned against the Lord and this school, we would not be here. We could have gone in another total direction. . . . [But] I never heard her say she was sorry.'" But Hamilton testified that she did in fact offer an apology. The panel concludes, "The ultimate issue is one for a jury to decide."
]]>Townsend complained to Hugh's wife, Michelle, who turned the investigation over to Grey-Allen. Grey-Allen was fired and replaced by an outside consultant before she completed her work on the matter.
In the district court, Grey-Allen's claim was dismissed on summary judgment, holding that "by participating in an internal investigation into Townsend's sexual harassment allegations that was not associated with any EEOC proceeding, Grey-Allen had not engaged in protected activity under the participation clause of Title VII's antiretaliation provision." (Grey-Allen conceded that she was not covered by the "participation clause.")
Townsend's claims went to trial under Title VII and New York law. The jury awarded $5200 against BEI, along with Michelle and Hugh Benjamin, and an additional $25,200 against Hugh for a tort claim under state law. Another $141,308 was awarded in attorney's fees and costs.
The Second Circuit affirms the entire judgment. With respect to the retaliation claim, the panel carefully observes that it is not prejudging whether an internal investigation of a harassment claim might be a protected activity either under the opposition clause or when an EEOC charge has been officially filed. Focusing in the narrow claim before it, the panel holds that section 704(a) does not cover Grey-Allen's claim, citing the plain language of the statute and the concensus of court of appeals decisions.
It rejects a novel argument that the affirmative defense under Faragher and Ellerth necessarily brings internal investigations within the ambit of participation:
"While the Faragher/Ellerth affirmative defense creates an incentive for employers to conduct internal investigations in order to show that they have met the first prong of this defense, it does not impose an obligation on employees to participate in such investigations as a necessary prerequisite to bringing a discrimination claim under Title VII . . . . Faragher and Ellerth do not provide a basis for bringing internal investigations not associated with a formal EEOC charge 'under this subchapter' within the language of the participation clause."
In a separate concurring opinion, Judge Lohier "reluctantly concur[s] in its decision to affirm the dismissal of Grey-Allen's claim," holding that while the resolution of the statutory question is not free of doubt, analysis of the Title VII language and legislative history inclines the judge to hold that only governmental (not private, internal) investigations were covered. "[I]t is up to Congress, now accustomed to the centrality of internal investigations in the employment context as a result of these developments, to consider the issue. Congress is best placed to fill this statutory gap between the text and history of the participation clause on the one hand, and Title VII's broad antiretaliation goals on the other hand. It may decide to do so by clarifying that the participation clause prohibits private employers from firing their human resources directors and EEO officers simply because they have conducted an internal investigation of, say, a sexual harassment complaint."
With respect to Townsend's claim, the panel affirms, holding that a hostile work environment fostered by a highly-place senior figure in the company is directly imputable to the employer, without regard to corrective measures under the Faragher/Ellerth defense. Holds the Court, the "alter ego" or "proxy" doctrine - as recognized in Faragher - "holds an employer liable in its own right for wrongful harassing conduct, rather than vicariously liable for actions of the employer's agents . . . . Faragher and Ellerth made clear that they did not intend to depart from these well-established theories of employer liability in sexual harassment cases."
The panel also affirms the jury's finding that Hugh Benjamin was properly within the class of "alter ego" employers. "Here, Hugh Benjamin is the only corporate Vice President of BEI, operating as second-in-command, with a position immediately below Michelle Benjamin in the corporate hierarchy. He is also a corporate shareholder with a financial stake in BEI. All of BEI's corporate shares are held by Hugh Benjamin, Michelle Benjamin, and their two children. Given these facts, the jury reasonably could have concluded that Hugh Benjamin was sufficiently high within the corporate hierarchy to qualify as BEI's alter ego . . . . Moreover, Hugh Benjamin exercised a significant degree of control over corporate affairs, which is consistent with alter ego liability. He collaborated with Michelle Benjamin on corporate decisions including hiring, and the supervisors and managers in the field reported directly to him."
]]>The Second Circuit reverses and sends the case back for trial. The panel expresses frank surprise that the district court thought that three such events did not present a triable issue of fact about a hostile work environment:
"[T]he district court, in finding that 'Washington's alleged acts consisted of relatively minor' and 'incidental physical contact,' . . . did not view the record in the light most favorable to Redd or credit inferences that were permissible from her descriptions of the events she physically experienced. The repeated touching of intimate parts of an unconsenting employee's body is by its nature severely intrusive and cannot properly be characterized as abuse that is 'minor.' This is not a manner in which women 'routinely interact,' . . . and it is not conduct that is normal for the workplace. 'When entering a workplace, reasonable people expect to have their autonomy circumscribed in a number of ways; but giving up control over who can touch their bod[ies] is usually not one of them.'" [Citation omitted.]
The panel noted that it was not necessary for the employee to allege or prove continuous breast-touchings, in view of the inherent severity of the intrusion:
"Direct contact with an intimate body part constitutes one of the most severe forms of sexual harassment, and Redd testified that Washington engaged in that conduct three times. The evidence that Washington repeatedly touched Redd's breasts; that Washington never apologized or indicated in any other way that her touchings were accidental; that Washington repeatedly requested that Redd come into her office even though she was not Redd's immediate supervisor; and that Redd, apprehensive of further repetition, consequently felt the need to avoid Washington, would allow a rational juror to find that Washington's conduct was not only severe, but pervasive."
Moreover, an inference could fairly be drawn from these facts that the contact was "because of sex":
"Redd inferred that Washington's touching, feeling, and rubbing up against Redd's breasts were 'homosexual advances' (Complaint ¶ 8). We see no principled reason why a jury, considering the evidence of repeated touching of such gender-specific body parts, would not be permitted to draw the same inference. Although Washington denied that she had 'sexually harass[ed]' Redd or 'touch[ed] PO Redd in any inappropriate manner' (Washington Aff. ¶ 6), the jury would not be required to believe those denials; hence the district court, in determining whether the Division was entitled to judgment as a matter of law, was required to disregard them. . . .
* * * *
"If the claim were that a supervisor--of either gender--stated to a female employee 'I want to feel your breasts,' or stated to a male employee 'I want to feel your penis,' a jury could easily infer that that stated desire was because of the employee's sex. A district court could not properly rule as a matter of law that that gender-specific harassment was not because of the employee's sex. It is no more permissible to rule as a matter of law that the supervisor's harassment was not because of the employee's sex when the supervisor repeatedly--albeit silently--touched, rubbed up against, and felt those gender-specific, intimate parts of the employee's body. Given the permissible inference that Washington's touchings were not accidental, we cannot affirm a dismissal that, in effect, holds that such repeated sexually abusive, gender-specific actions are less probative than words."
Finally the court holds that the employer did not establlish its affirmative defense under Faragher/Ellerth as a matter of law, either because there was an arguable "tangible job action" (a suspension) or because the employer did not adequately respond to the employee's complaints:
"In asserting the defense, the Division did not indicate that it had taken any preventive or corrective action; rather, it contended that no such action was required because Redd did not sufficiently complain about Washington's conduct. It is undisputed that, with respect to Washington's alleged sexual harassment, Redd did not file complaints in writing; she testified in her deposition that to file such complaints would have subjected her to criticism from her coworkers . . . . However, Redd testified that she complained orally to Burgos. . . . Burgos, the Division's Director of Human Resources, acknowledged that his office investigates harassment complaints and that it disciplines supervisors found to be engaging in 'activity that could be described as sexually harassing' . . . . And despite testifying that he did not recall whether Redd had complained about Washington 'directly' to his office . . ., his testimony indicated that it was sufficient for Redd to make a complaint directly to Burgos himself: He testified as a general matter that '[i]f you made a complaint to me or my office, . . . it would be investigated.'"
Because the record evidence was in dispute as to whether such oral complaints were made in this case, the panel remands for a trial on the defense.
]]>"Deaf from birth, Moncada arranged for a sign language interpreter to meet her at the job site to translate as she applied for the position. Carl Ray, an account manager for Smith, met Moncada at the job site and told her she could not apply for the position because she is deaf, that the warehouse environment would be too dangerous for her. Moncada attempted to explain that she had had no trouble communicating while working in warehouses in the past, but Ray persisted, advising her that she could not apply."
The Fifth Circuit affirmed the jury verdict in this case over a host of challenges:
1. The defendant agency Smith claimed that it was not within the "affecting commerce" language of Title VII, because it was supposedly a local operation, but the panel found that Smith forfeited that argument in its pre-trial stipulation: "In the joint pretrial order, the parties agreed that Smith had advertised the stock clerk position to which Moncada applied on the Texas Workforce Commission's 'Work in Texas' website. That site provides resources for individuals, both Texans and out-of-staters, who seek work in Texas. Smith's advertising on an open website with the potential, or even intent, to draw residents of other states to Texas in search of employment is enough to clear the 'very low' bar that defines economic activity affecting interstate commerce."
2. The Fifth Circuit affirmed (over an abuse of discretion standard) the district court's determination that Smith forfeited a defense against the EEOC of failure-to-conciliate by first failing to allege it in the original answer, then (after being allowed to file an new answer) waiting unreasonably long to amend. The court holds that a failure-to-conciliate defense is a "condition precedent" which must be plead with particularity under Fed. R. Civ. P. 9(c), noting a split with other circuits on this question.
3. The Fifth Circuit upholds the preclusive sanction against the EEOC for failure to disclose damage calculations under Fed. R. Civ. P. 26(a)(1)(A)(iii), but also holds that Smith was not entitled to a greater sanction.
4. The court upholds the punitive damage award over objections to the jury instruction, and over a plain-error objection to the weight of evidence. It holds that the individual at Smith who refused to allow Moncada to apply (Ray) was an "manager" of the company for purposes of imputing fault: "Smith's highest-ranking employee, Joe Roberts, testified that Ray was the account manager when Moncada sought employment. Roberts also testified that account managers have the authority to make hiring decisions and are the immediate supervisors for employees working for Smith's clients. From Roberts's testimony, the jury could reasonably have found that Ray had the authority to hire and supervise employees and was therefore acting in a managerial capacity." Finally, the court rejects a further remittitur of the award (the trial judge reduced a $150,000 award to $68,800 - twice the actual damage).
5. Finally, the court upholds a two-year injunction against further violations, finding that injunctive relilef is mandatory under Title VII unless the employer establishes "by clear and convincing evidence that there is no reasonable probability that it will violate the ADA in the future."
]]>Thompson issue dozens of write-ups against Hicks for various alleged work-rule violations. Finally, in September of 2008, the FPD informed Hicks that owing to the many complaints about his performance, the only way he could avoid termination was to accept a demotion to a "serviceman II" title, with a dramatic reduction in pay (from $29.62/hr. to $20.43/hr.). Hicks accepted the demotion but filed a fresh charge alleging retaliation.
There was direct testimony bearing on Thompson's motive at trial:
"Joseph Hruska, the intermediate supervisor between Hicks and Thompson. In his affidavit, Hruska stated that as soon as he began working at the Central Garage, Thompson told him that there were two employees - Hicks and Hernandez-who 'needed to be fired' because they had filed charges of discrimination against Thompson. Hruska further stated that two management level employees-Richard Wagner (the superintendent) and Richard Bono (a manager)-also told him, on multiple occasions, that the FPD wanted to 'get rid of' Hicks and Hernandez for filing charges against the FPD."
At trial, the jury returned a verdict for Hicks.
The Seventh Circuit affirms. It rejects the employer's argument that Hicks did not suffer an "materially adverse action," because he supposedly accepted the demotion voluntarily:
"Here, Hicks did not request or even acknowledge a need for a demotion; he was given a choice between taking a demotion or staying in his present role to face further disciplinary action up to termination. Hicks testified that he had no choice but to accept the demotion because he believed that he would be fired if he did not, and the FPD made it clear to Hicks that it would seek to terminate him if he did not accept the demotion. Such a choice could be said to be no choice at all, and the jury agreed. Thus, Hicks presented sufficient evidence at trial for a reasonable jury to find that his demotion was involuntary."
The panel rejects the employer's argument, also, that the 22 months that elapsed from Hicks' cooperation in the investigation to his forced demotion broke the chain of causation. Although temporal remoteness can vitiate causation, here there was other evidence that tended to support an inference of retaliation: "Hruska testified that Thompson told him that Hicks and Hernandez needed to be fired because they had filed charges of discrimination against Thompson, and this constitutes direct evidence that Hicks was demoted because he engaged in a protected activity."
The panel also held that the facts of this case adhered to the "cat's paw" model recently adopted by the Supreme Court in Staub v. Proctor Hosp., 131 S. Ct. 1186 (2011), because the avowed decision-maker (named Sanchez-Bass) and the other officials relied on Thompson's reports:
"Hicks presented sufficient evidence at trial for the jury to find that the FPD officials based their decision to offer Hicks the demotion on the twenty-eight disciplinary action forms he received either directly from Thompson or with Thompson's approval. While Thompson himself did not participate in the hearing at which Hicks was offered the demotion, Thompson submitted the disciplinary action forms to Sanchez-Bass. Her testimony at trial indicated that she relied on the forms when offering Hicks the choice between accepting the demotion or facing further disciplinary action, including termination. The jury found that Thompson had a retaliatory animus against Hicks, and since Sanchez-Bass and the other FPD officials who demoted Hicks were 'dependent on another employee to supply the information on which to base' their decision, his animus can be imputed to the FPD under the 'cat's paw' theory. Brewer, 479 F.3d at 918. Therefore, Hicks put forth sufficient evidence to support the jury's decision on the retaliation claim."
The panel also upheld the jury charge. The employer complained that the instruction was based on the Ninth Circuit's model instructions, disregarded Seventh Circuit law, and - most importantly - failed to describe the adverse action at issue in the case. The panel found no prospect of jury confusion:
"The trial focused on Hicks's demotion, and in the choice between twenty-eight citations at work or a demotion to a different position with a concurrent $9 per hour cut in pay, no reasonable juror could be confused about which action was the adverse action at issue. Since the district court did not misstate the applicable law and there is no evidence that the jury was misled or confused, the FPD is not entitled to a new trial."
Finally, the panel affirms the reinstatement order, over the employer's suggestion that the order would place Hicks once again under Thompson's supervision: "While the relationship between Hicks and Thompson may be acrimonious, Hicks specifically requested reinstatement, and we have ruled that mutual dislike between an employer and an employee is not a satisfactory reason to deny reinstatement."
]]>"I've thought about this quite a bit, and I'm sure that part of my decision was that as a mother, with knowing the history of her miscarriage, knowing how my pregnancy was rather difficult, I - I can only assume that part of that decision was that I felt it was - it was to be nice and to give Lisa a desk job. Concerned [sic] with her pregnancy was part of my reasoning. It was not the official reasoning, but it was certainly part of what I felt was - was right."
The jury award $80,000 in back pay and $10,000 in compensatory damages. On the sheriff's motion for judgment as a matter of law, the district court upheld the verdict on liability, but vacated the back pay award on the alleged ground that Holand would have been terminated based on "after-acquired" evidence.
On appeal, the Eleventh Circuit affirms the liability verdict and reinstates the back pay. The panel holds, first, that Sterns testimony concerning the one motive for the transfer was enough to establish that pregnancy was a motivating factor: "The fact that Ms. Sterns may have acted out of concern that Ms. Holland previously had a miscarriage-in other words, the fact that Ms. Sterns may have had benign intentions-is beside the point." While there was other evidence in the record that supportedd other, non-discriminatory reasons for the decision, the panel notes that it was the jury's province to weigh credibility.
The panel affirmed the verdict that Ms. Holland's termination was motivated by pregnancy. The jury could have disbelieved the proffered reason that, according to Chief Deputy Docobo's testimony, there was a "series of problems" that went "back literally, uh, well over a year," that there were "problems with her work performance," and that Holland "was creating morale problems within the division." Docobo testified under cross-examination that he had no personal knowledge of Holland's performance, and that those with personal knowledge praised her performance. Other proffered reasons - that Holland was exploiting her family relationship (her father was a high-ranking official), that she caused morale issues, that she lacked required certification - also failed to pan out.
There was also an issue about whether Holland may have refused certain assignments because of medical restrictions owing to her pregnancy. The sheriff claimed that declined to accommodate her restrictions because he thought she was a contractor, rather than an employee. But the record included evidence that the IRS classified Holland as an employee and the sheriff received advice of counsel to the same effect. "Beyond all of this, the evidence showed that, even though Ms. Holland was repeatedly asked about her restrictions, and even though both [Holland's immediate supervisor] Ms. Lay and Ms. Sterns indicated that they would get back to her on that issue, neither of them ever did."
The panel also holds the the district court erred in vacating the back pay award. The district court's reliance on the after-acquired evidence rule was error, the panel concludes, because the sheriff never plead it as an affirmative defense or argued it at trial. Moreover, apart from the waiver, the after-acquired defense did not apply because the employee had not engaged in misconduct.
"The after-acquired evidence doctrine addresses those situations where the employer, after its discriminatory discharge of an employee, learns of that employee's misconduct sufficient to justify the employer's decision, after the fact, to discharge the employee for lawful, nondiscriminatory reasons. The Eleventh Circuit, however, has not applied the after-acquired evidence doctrine to circumstances where, after a discriminatory discharge, the employer learns of information, unrelated to the employee's misconduct, which also disqualifies that employee from continued employment. Instead, in those circumstances, the Eleventh Circuit has applied other equitable defenses to an award of back pay (and front pay), defenses that protect the employer's continuing interest in being able to make nondiscriminatory policy, organizational, or personnel decisions."
]]>Although each of the African-American employees was eventually able to get a reduction in their discipline, the racial disparaties remained. The EEOC and plaintiffs sued under Title VII, § 1981 and Louisiana civil-rights law.
The employer encountered a serious difficulty during the discovery phase of the case. While it originally named (and produced for depositions) the individuals said to have been the decisionmakers in each disciplinary action, when deposed these witnesses actually denied involvement in these decisions. Only four years after the decisions were made, the employer finally produced a single, individual decisionmaker (Mr. Thorness, General Superintendent of Transporation), but by this point the witness could not recollect the precise details of these disciplinary actions.
"KCSR later produced a declaration from Thornell stating that during the period in which these decisions were made, it was Thornell's responsibility to make disciplinary decisions regarding KCSR engineers and conductors; that in making such decisions, it was his usual practice to review the employee's infraction and employment history; but that he had no specific recollection of these decisions; and that he may have delegated the decisions to his assistant. The record contains no testimony from Thornell's assistant, A.J. Sonnier, who died during the litigation in this case."
The district court granted summary judgment in all four cases, but the Fifth Circuit reverses in two (Turner and Thomas). The panel majority holds that these two employees challenged the initial decisions to discipline (not the eventual resolution on appeal), and that in each case they were able to identify a white employee who was either jointly involved in the incident or committed a violation of equivalent severity. (According to the opinion, the EEOC failed to timely raise another, more succinct argument under the "same incident" test - McDonald v. Santa Fe Trail Transportation Co., 427 U.S. 273 (1976) - that where a white employee receives lesser discipline than a black employee for the same accident, the employee establishes a prima facie case.)
The panel majority notes that in making out the prima facie case, the incidents need not be identical, and "the similitude of employee violations may turn on the 'comparable seriousness' of the offenses for which discipline was meted out and not necessarily on how company codes an infraction under its rules and regulations.'" In addition, Turner and Thomas were able to establish that their disciplinary histories were comparable to their white counterparts.
The panel majority then noted that under Texas Department of Community Affairs v. Burdine, 450 U.S. 248 (1981), the employer was required to produce admissible evidence of a valid, non-racially biased reason for the actions. But in the absence of testimony by the decisionmaker about the reasons for each decision, the employer came up short. The actual identity of the decisionmaker - Thornell or Sonnier - mattered in this analysis:
"[T]here is extensive record evidence of race-based comments by Sonnier, which, if he were the actual decisionmaker, would be extremely probative of intentional discrimination. The purpose of '[t]he McDonnell Douglas division of intermediate evidentiary burdens [is] to bring the litigants and the court expeditiously and fairly to th[e] ultimate question' of whether 'the defendant intentionally discriminated against the plaintiff.' Burdine, 450 U.S. at 253 (emphasis added). By misidentifying the relevant decisionmaker for so long, KCSR has not acted to bring us expeditiously and fairly to this ultimate question."
Assuming, as the parties did, that Thornell was the relevant decisionmaker, his declaration did not meet the Burdine burden of production. "A declaration from someone who acknowledges he may not even have been the decision-maker and makes no effort to re-evaluate what he would have done at the time based on what would have been before him, produces nothing to support the employer's evidentiary burden." And although the disciplinary files included other documents discussing the circumstances of each incident, none bore on the admitted decisionmaker's actual rationale for why he made disparate decisions for white and black employees.
Thus, absent such reasons, the two employees were entitled to proceed to trial.
Judge Owen, dissenting, rejects the premise that the employer's burden of production includes evidence of such precision: "The panel majority apparently would require Thornell to explain why he disciplined Turner by terminating him, instead of some lesser sanction, and to further explain why he did not terminate other employees who violated operational rules. KCSR is not required to come forward with such evidence at the second stage of the burden-shifting framework of McDonnell Douglas. As the Second Circuit has explained, the employer does not have the burden at the second stage of rebutting pretext. Such a "requirement would place on the employer at the second stage of the McDonnell Douglas process 'the burden of showing that the reason for the rejection was not a pretext, rather than requiring such proof from the employee as a part of the third step'" (quoting Lieberman v. Gant, 630 F.2d 60, 65 (2d Cir. 1980)).
]]>The benefit in this case was a $700 per month supplemental benefit paid to retirees who met four conditions under the plan:
"4.12 Supplemental Benefits
"(a) If a Member who:
"(i) otherwise satisfies the requirements for a Pension under this Plan; and
"(ii) has at least one year of service with WSMS; and
"(iii) transferred to the Plan from an Affiliated Employer on or before January 1, 1998 or transfers to the Plan from WSRC; and
"(iv) retires before his Normal Retirement Age from active service on or after October 1, 1998,
"he shall be entitled to a monthly supplement (which shall commence with the first Pension payment made under the Plan on account of such retirement and the last payment shall be in the month preceding the Member's attainment of Normal Retirement Age) equal to the following: [omitted]"
The plan benefits committee removed this option by way of an amendment at the end of 2004. Nevertheless, Savani applied for and obtained these benefit payments for nearly a year and a half before (in June 2006) the plan committee wrote Savani to notify him of the error - and to demand "reimbursement of $9,100 within twenty-two days." The district court granted judgment to the plan, holding that plan committee reasonably interpreted the benefit plan not to affect an accrued benefit.
The Fourth Circuit, 2-1, reverses. It holds that in spite of the broad deference typically conferred upon plan administrator decisions, here the administrator interpreted the supplemental retirement plan against its plain terms.
"In denying Savani's request for benefits, the committee found that the anti-cutback statute was not violated because the $700 benefit was not an 'accrued benefit' within the meaning of ERISA. Our decision turns on whether the $700 benefit was included in the 'accrued benefit' as defined by the Plan, ERISA, and applicable regulations. Because the plain, unambiguous language of the WSMS Plan contemplates inclusion of both § 4.12 supplements in its definition of 'accrued benefit,' the committee abused its discretion in denying Savani's request for benefits."
The panel majority held that the plan expressly defines "accrued benefit" as including the supplement:
"The Plan explicitly defines 'accrued benefit' as including 'applicable supplements.' The plurality of that term, when considered in light of the fact that only two supplements were included in § 4.12, mandates that each of the supplements was capable of being 'applicable' under some circumstance. Any interpretation to the contrary, including that of the benefits committee, is inconsistent with the plain language of the plan. Because there is no reasonable alternative interpretation of the term 'applicable,' it is not ambiguous. The committee did not have discretion to read out this unambiguous provision of the Plan, and therefore abused its discretion in finding that the $700 supplement could never be applicable and in denying Savani's claim."
Hence, plan participants and their counsel should train themselves never to presume that "the house always wins" in ERISA cases, where the language points in only one plausible direction, i.e., in favor of the retiree.
]]>A chart included in the opinion establishes that during the relevant period, all of the men in the broker category earned higher salaries than all but one of the women. Though the employer attempted to account for this in two ways, the court holds that neither reason was established as a matter of law, and the employee deserved a trial.
The first argument was that education and experience favored the men over the women. As the panel explains, that might account for the disparate salaries for employees first coming in the door, but not afterwards:
"Let us suppose that education and experience (which imply greater pay at other firms, with which Acosta is competing for talent) explain some or even all of the difference in the starting salaries reflected in the table. There is no reason why they should explain increases in pay while a person is employed by Acosta. Changes in salary at most firms depend on how well a person perform at work. Education and experience may predict on-the-job performance, but the prediction affects thestarting wage, just as scores on the LSAT predict grades in law school and thus affect the probability of admission. Once a person has been admitted to a given law school, however, it is performance on exams, or in writing papers, not the LSAT, that determines grades; and grades plus extracurricular activities, not the LSATscore, affect who is hired by which law firms; after that, performance on the job, not the LSAT or grades in law school, determines who makes partner and how much each lawyer is paid."
The second explanation offered by the employer was pure chance distribution. The panel responds thus: "Random decision is a factor other than sex. If Moe had acted randomly, however, then the entries for men and women in the table should be jumbled together. The actual distribution is not random. It is difficult to see how every man could be paid more than all but one woman, and why men received greater raises, if [the employer] were pulling numbers out of a jar."
The panel also reminds that under the Equal Pay Act, the burden to establish that such factors actually account fo the difference in salaries is on the employer, making application of the McDonnell Douglas test inapposite: "A concurring opinion in Coleman v. Donohoe, 667 F.3d 835 (7th Cir. 2012), observed that the burden-shifting approach may cause more confusion than can be justified by its benefits. Today's case illustrates one form that confusion can take."
The panel concludes: "King's claim under the Equal Pay Act must be returned to the district court for a trial at which Acosta will need to prove, and not just assert, that education and experience account for these differences. The Title VII claim also must be tried, because King has marshalled evidence that would permit a trier of fact to conclude that Acosta's explanations are smokescreens."
]]>Dulaney's complaints to management came to naught:
"Dulaney complained about Mills's derogatory remarks to his direct supervisor, Mike Bourne. Bourne responded to this complaint by reminding Dulaney that she was 'replaceable.' J.A. 48. Dulaney complained to Bourne on one other occasion. In early 2007, she had a dispute with Jane Vars, another employee at the plant. Vars had called Dulaney a 'nigger lover' and spread rumors similar to the one just described. J.A. 248. Bourne 'laughed it off.' J.A. 247. When Dulaney and Vars expressed their intent to take their dispute to a more senior supervisor, Donnie Woodward, Bourne threatened to fire them if they went over his head."
Eventually, on November 2, 2007, Dulaney was called into a closed-door meeting and given a severance agreement to sign:
"Critical to this appeal, an internal PCA memorandum about Dulaney explains '[w]hen the separation agreement is prepared . . . payroll automatically stops the employee's pay as of the termination date stated in the agreement . . . Payroll coding is as follows: Employment status is 'terminated' . . . Termination Reason should be completed as Quit with Notice.'"
When she refused to sign, Bourne escorted her from the property, demanding tha she gather up her personal belongings and to relinquish her office key. Though formally invited to return to work, ultimately - during an later unemployment hearing described her status as "terminated."
On these facts, the district court held that no adverse employment action had been taken.
The plaintiff, with an assist from the EEOC as amicus, wins reveral on appeal. The panel sets aside such questions as whether Mills was a "supervisor" and whether this would be properly classified as a "submission case," i.e., one in which an employee submits to sexual abuse in order to retain his or her job. Instead, it cuts right to the question whether forcing the employee to choose between severance and outright discharge constituted a "tangible employment action." The panel makes short work of this question. The record presented disputed factual issues about whether the offered severance package was an ultimatum:
"According to Dulaney, whose testimony we must credit on summary judgment, Bright informed her that she would be fired if she did not sign the severance agreement. After she refused to do so, Bourne walked her to her locker, directed her to gather her lock and other belongings, took her key to the facility, then escorted her off the premises. Further, according to an internal memorandum, PCA stopped Dulaney's payroll as of November 2, three days before Dulaney first saw the severance agreement. It would not be unreasonable for a jury to conclude, based upon this fact, that Dulaney had been terminated regardless of whether or not she signed the agreement."
The court also holds that the tangible employment action needn't be carried out by the harasser him/herself, provided that there is nexus between the harassment and the ultimate action, as arguably occurred here:
"[T]here is testimony that Bourne, the supervisor who escorted her from the premises on November 5, criticized and laughed at Dulaney first when she reported that Mills was making inappropriate sexual comments about her to her co-workers, again when she reported Mills's physical harassment, and again when she reported that some co-workers continued to tease her about the sex-themed rumors initiated by Mills. Bourne's treatment of Dulaney as she sought to report Mills's sexual harassment and his subsequent involvement in her termination suggest a nexus between Mills's harassment and her termination. Such questions are for the jury to decide.
As a postscript, it is curious that the panel could have written 17 pages on this topic without once citing (1) the most obviously pertinent authority, Pennsylvania State Police v. Suders, 124 S. Ct. 803 (2004), holding that constructive discharge may constitute a tangible employment action; or (2) the Older Workers Benefit Protection Act, which imposes the minimum 21-day acceptance/7-day cooling-off requirement for ADEA releases (29 U.S.C. § 626(f)(1)(E)(i) and (F)), causing employers to generally adopt that period as a default.
]]>Despite eventually obtaining a desired promotion to Associate Professor, Nassar found working with Levine to be stressful and requested a transfer to a different hospital within the same university system. He also submitted a letter of resignation stressing his feelings of harassment:
"The primary reason of my resignation is the continuing harassment and discrimination against me by the Infectious Diseases division chief, Dr. Beth Levine. . . . I have been threatened with denial of promotion, loss of salary support and potentially loss of my job[.] . . . [This treatment] stems from [Levine's] religious, racial and cultural bias against Arabs and Muslims that has resulted in a hostile work environment."
There was evidence at trial that the chair of the internal medicine, Dr. Gregory Fitz, took umbridge on the attack on Levine and blocked Nassar's transfer. Nassar eventually moved out of state to locate lower-paying work at an HIV/AIDS clinic.
A jury held that Nassar's Title VII rights were violated, both discrimination (that he was construtively discharged from his first hospital) and retaliation (because he was blocked from commencing work in the second hospital). The jury awarded Nassar $436,167.66 in back pay and over three million dollars in compensatory damages.
On appeal, the Fifth Circuit affirms the retaliation judgment but orders entry of judgment as a matter of law on the constructive discharge claim. As to the latter, the panel finds that the racial slurs created a hostile work environment but not enough to make resignation a fitting response.
"Constructive discharge claims like the one Nassar brought are essentially hostile work environment claims but more extreme. We therefore have required plaintiffs advancing constructive discharge claims to prove the existence of an aggravating factor . . . . Nassar proved . . . [no such] factors with the possible exception of 'badgering, harassment, and humiliation.' In fact, UTSW approved Nassar's promotion to a position with a higher salary and more preferable employment terms."
Because the constructive discharge claim carried a substantial back-pay remedy, and the jury's award was vacated, the panel remanded for a new hearing on damages. Interestingly, the panel approved setting back pay by comparing his employment to the lost opportunity at the second hospital, Parkland, rather than the first. "By retaliating against Nassar and blocking his job with Parkland, UTSW deprived Nassar of the pay he otherwise would have earned there. Therefore, to make Nassar whole, the back pay ought to be measured against what Nassar would have made at Parkland." The court also holds that lost honoraria income is not recoverable as back pay, because it was not (strictly speaking) income, but it could be recovered under 42 U.S.C. § 1981a(b)(2), as "future pecuniary losses."
Cook v. IPC Int'l Corp., No. 11-2502 (7th Cir. Mar. 8, 2012): This case involved a dispute over the employee's termination:
"The defendant provided security for a mall in Alton, Illinois, and employed the plaintiff as a security at the mall. She presented evidence that her immediate supervisor, a man named Spann, made sexually offensive comments to other women in her presence, said he wanted to have an all-male staff, and exhibited favoritism toward his male subordinates. The plaintiff complained to him repeatedly about his behavior. He refused to change his ways, and instead began giving her negative evaluations and accusing her in communications to the defendant's headquarters of serious misconduct, including theft; the jury could have found that the accusations were fabrications."
The regional manager (and Spann's immediate superior), named Colburne, eliminated her job with Spann and sought to repost her to another shopping center, but before she could commence working at that new post, Spann fired her from the Alton job. Plaintiff sued over the termination.
The district court charged the jury that it was required to identify "the decisionmaker," which under these facts was understandably confusing. The jury even sent a note to the judge for clarification about whether there could be more than one decisionmaker. Eventually, the jury found on the verdict form that the plaintiff had been fired by the employer, but that Spann was not "the" decisionmaker. The judge, on a motion for a new trial, held that the employee had the burden - in the absence of "cat's paw"-type evidence - to prove that Spann was the "sole decisionmaker."
The Seventh Circuit reverses. In a brief opinion signed by Judge Richard Posner, the panel holds that the district court erred by charging the jury with an instruction both confusing and legally inaccurate. The judge believed that a case such as this, where two different supervisors were involved, must be funnelled through a "cat's paw" framework per Staub v. Proctor Hospital, 131 S. Ct. 1186(2011), or else the employee must prove the existence of a "sole decisionmaker."
The opinion sorts out why this is wrong:
"The 'cat's paw' doctrine can be thought of as an application of the 'motivating factor' doctrine; the [subordinate's] malevolent intent is imputed to the employer. So if the employer can't show that the . . .supervisor, who did the actual firing (or took some other adverse employment action), had a lawful motive uncontaminated by the [subordinate] that would have led the supervisor to fire the employee even without the [subordinate]'s interference, the employee is entitled to damages. See Staub v. Proctor Hospital, supra, 131 S. Ct. at 1192. But 'motivating factor' is another irrelevance in this case. There's no evidence that had Spann not been in the picture the plaintiff would have been fired anyway. The defendant did not try to prove that-it denied having fired her."
The panel also bemoans the confusion often sown in Title VII trials when judges unnecessarily seek to charge juries directly with legal concepts of causation:
"From a legal as distinct from a factual standpoint, the case was simple and should have been presented in all its simplicity to the jury. Jurors are unlikely to understand legal concepts that judges have difficulty understanding. . . ."
]]>The employee took sick leave after her demotion, but continued to correspond with the board about her employment. "Sanders repeatedly asked the Board to provide her with a job description defining the duties of her new position, and a new contract. For several months, the Board did not provide Sanders with a new contract or a job description defining the duties of her new position." Indeed, the board moved to eliminate the job formally, but ultimately did not vote to do so. Eventually Sanders resigned, having never received satisfaction on her requests and under threat of termination by the board for overstaying sick leave.
The jury awarded a verdict to Sanders for race discrimination, deciding that:
"Sanders had suffered an adverse employment action when she was demoted from finance coordinator to food services assistant, and the adverse employment action was based on race. The jury awarded $10,000 in compensatory damages for the emotional distress and anguish arising from the race discrimination claim. The jury also determined Sanders had been constructively discharged on the basis of race, and awarded her $60,825 for lost wages and benefits. Finally, the jury found Sanders was entitled to $5,000 in punitive damages against individual school board member Elizabeth Johnson, $2,500 in punitive damages against individual school board member Milton Hall, and $500 in punitive damages against individual school board member Victoria Perry."
Post-trial, the district court upheld the discrimination verdict but overruled the constructive discharge finding and the punitive damages.
The Eighth Circuit reverses. Most significantly, it finds that the jury could have found that the demotion alone constituted constructive discharge:
"Here, a reasonable jury could conclude the change in position from finance coordinator to food services assistant was a demotion with a diminution in title and significantly decreased responsibilities, and that a reasonable employee in Sanders's position would find the reassignment demeaning. Furthermore, '[c]onstructive discharge through placement in a job that is 'intolerable' may be shown by a deliberate placement in a job for which one is not qualified and that one is unable to perform, regardless of whether the environment is intolerably abusive or oppressive.'" [Quoting Green v. Harvard Vanguard Med. Assocs., Inc., 944 N.E.2d 184, 195 n.10 (Mass. App. Ct. 2011)]
The panel holds that the employee continuted to ask (unsuccessfully) for a job description bolstered the finding of constructive discharge; a jury could infer form such facts that
The court also remands the case for retrial on punitive damages under 42 U.S.C. § 1981a(b)(1), adopting the rule of the Third Circuit (Alexander v. Riga, 208 F.3d 419, 432 (3d Cir. 2000)) that deliberate racial discrimination so obviously violates federal law that the burden is on the employer to establish actual ignorance of the law.
"There was strong evidence the individual school board members discriminated against Sanders on the basis of race. The jury rejected the Board's evidence that they reassigned Sanders because of insubordination, leaving no other motivation for the demotion except for the color of Sanders's skin. That evidence, coupled with the Board members' failure to consult with the superintendent, legal counsel, or the school district's employee manuals before taking adverse action against Sanders, seems to be sufficient evidence the school board members acted with callous indifference to whether their actions violated federal law."
Along with a mandate to retry the punitive damage claims under this legal standard, the court also remands the attorney's fees to the district court for recalculation based on Sanders' success on appeal and possible success on a new trial.
Sisk v. Picture People, Inc., No. 10-3398 (8th Cir. Feb. 28, 2012): The bottom line on this appeal was the Eighth Circuit affirms entry of judgment as a matter of law, holding that the employee at trial failed to establish a causal link between her request for FMLA leave and termination two months later.
But in the course of so holding, the panel reminds us of an important point about the Burdine and McDonnell Douglas shifting-burdens associated with the adjudication of most employment discrimination cases. Where an employee lays the foundation of their case with prima facie evidence of discrimination, under whatever the legal standard might be, the employer has the burden to produce admissible evidence of a legitimate, non-discriminatory (or non-retaliatory) reason for its decision. In this case, by the time plaintiff rested at trial, the employer had not proferred evidence of such a reason.
When the employer fails to proffer a legitimate, non-discriminatory reason, the result may be entry of judgment for the employee. Holds the court: "Until a defendant articulates a non-discriminatory reason for the alleged adverse employment action, the relevant inquiry is the sufficiency of the plaintiff's prima facie case. Assuming a defendant does not articulate a reason for its alleged act, three scenarios are possible: First, if the court determines that no reasonable jury can find facts constituting a prima facie case, the defendant prevails as a matter of law. See, e.g., Quinn v. St. Louis Cnty., 653 F.3d 745, 754 (8th Cir. 2011). Second, if the court determines that a reasonable jury must find that the plaintiff has established a prima facie case, the plaintiff prevails as a matter of law. See St. Mary's Honor Ctr. v. Hicks, 509 U.S. 502, 509 (1993). Third, if "reasonable minds could differ as to whether a preponderance of the evidence establishes the facts of a prima facie case, then a question of fact . . . remain[s], which the trier of fact will be called upon to answer.' Id. at 510-11 (emphasis omitted)." [Emphasis in original.]
]]>The court summarized the background of the case:
"Merrill Lynch, accused of discriminating against 700 black brokers currently or formerly employed by it, delegates discretion over decisions that influence the compensation of all the company's 15,000 brokers ('Financial Advisors' is their official title) to 135 'Complex Directors.' Each of the Complex Directors supervises several of the company's 600 branch offices, and within each branch office the brokers exercise a good deal of autonomy, though only within a framework established by the company.
"Two elements of that framework are challenged: the company's 'teaming' policy and its 'account distribution' policy. The teaming policy permits brokers in the same office to form teams. They are not required to form or join teams, and many prefer to work by themselves. But many others prefer to work as part of a team. Team members share clients, and the aim in forming or joining a team is to gain access to additional clients, or if one is already rich in clients to share some of them with brokers who have complementary skills that will secure the clients' loyalty and maybe persuade them to invest more with Merrill Lynch. As we said, there are lone wolves, but there is no doubt that for many brokers team membership is a plus; certainly the plaintiffs think so.
"The teams are formed by brokers, and once formed a team decides whom to admit as a new member. Complex Directors and branch-office managers do not select the team's members.
"Account distributions are transfers of customers' accounts when a broker leaves Merrill Lynch and his clients' accounts must therefore be transferred to other brokers. Accounts are transferred within a branch office, and the brokers in that office compete for the accounts. The company establishes criteria for deciding who will win the competition. The criteria include the competing brokers' records of revenue generated for the company and of the number and investments of clients retained."
In the wake of Dukes, the plaintiffs tailored their request for class certification to certification of select legal issues (Fed. R. Civ. P. 23(c)(4)) and for entry of injunctive relief to end the practice (Fed. R. Civ. P. 23(b)(2)).The district court denied certification of a class action to determine whether this policy had a racially discriminatory impact, holding that the employees' claims were insufficiently common to bracket together into a single case. But in the face of uncertainty, the lower court urged an interlocutory appeal to determine whether this conclusion was legally correct in light of Wal-Mart.
The Seventh Circuit reverses. After resolving - in an extended ten-page exegesis - whether the appeal was timely under Fed. R. Civ. P. 23(f), the panel dedicates just another ten pages to the merits.
The panel first expresses that Dukes was a distinctive case because of its breadth (1.5 million potential class members) and the signal absence of core, challenged policy: " . . . [B]ecause there was no company-wide policy to challenge in Wal-Mart-the only relevant corporate policies were a policy forbidding sex discrimination and a policy of delegating employment decisions to local managers-there was no common issue to justify class treatment."
The case here was entirely different, and the district court missed seeing the distinction. The allegation that Merrill Lynch fostered teaming-up oppotunies meant - according to the plaintiffs - that African-American brokers tended to get shut out of business opportunites. The panel offered this example:
"Suppose a police department authorizes each police officer to select an officer junior to him to be his partner. And suppose it turns out that male police officers never select female officers as their partners and white officers never select black officers as their partners. There would be no intentional discrimination at the departmental level, but the practice of allowing police officers to choose their partners could be challenged as enabling sexual and racial discrimination-as having in the jargon of discrimination law a 'disparate impact' on a protected group-and if a discriminatory effect was proved, then to avoid an adverse judgment the department would have to prove that the policy was essential to the department's mission."
The Seventh Circuit - while making clear that the merits of the case have not been decided and that there was no allegation that Merrill Lynch deliberately committed racial discrimination - holds that such an allegation has enough common to warrant at least limited class certification:
"The district judge exaggerated the impact on the feasibility and desirability of class action treatment of the fact that the exercise of discretion at the local level is undoubtedly a factor in the differential success of brokers, even if not a factor that overwhelms the effect of the corporate policies on teaming and on account distributions. Obviously a single proceeding, while it might result in an injunction, could not resolve class members' claims. Each class member would have to prove that his compensation had been adversely affected by the corporate policies, and by how much. So should the claim of disparate impact prevail in the class-wide proceeding, hundreds of separate trials may be necessary to determine which class members were actually adversely affected by one or both of the practices and if so what loss he sustained-and remember that the class has 700 members. But at least it wouldn't be necessary in each of those trials to determine whether the challenged practices were unlawful. Rule 23(c)(4) provides that 'when appropriate, an action may be brought or maintained as a class action with respect to particular issues.' The practices challenged in this case present a pair of issues that can most efficiently be determined on a class-wide basis, consistent with the rule just quoted."
In sum, after the Dukes wave crashed upon civil rights law, the tide is now receding - common sense is gradually being restored by the lower courts to these Rule 23 cases.
]]>The complaint alleged that State Street continued to stay invested in GM stock, despite the storm warnings of an imminent financial collapse of the company. On August 1, 2008, GM announced a third quarter loss of $15.5 billion, and by 2009 the firm was seeking bankruptcy protection. State Street waited until November 21, 2008 to suspend purchases of GM stock, and until March 31, 2009 to sell off 50 million shares held by plan participants, in the process costing fund investors most of the valur of their holdings. Plaintiffs filed a putative class action, alleging that the belated decision was a breach of fiduciary duty of prudence under ERISA § 409(a), 29 U.S.C. § 1109(a).
Although the district court dismissed the action, the Sixth Circuit reverses. The panel acknowledges that ESOPs are ordinarily excepted from the the duty of diversification. However, "an ESOP fiduciary may be liable for failing to diversify plan assets even where the plan required that an ESOP invest primarily in company stock. "We have explained that ERISA's statutory exemptions for ESOPs 'do[ ] not relieve a fiduciary . . . from the general fiduciary responsibility provisions of [§ 1104] which, among other things, require a fiduciary to discharge his duties respecting the plan solely in the interests of plan participants and beneficiaries and in a prudent fashion . . . nor does it affect the requirement . . . that a plan must be operated for the exclusive benefit of employees and their beneficiaries'" (quoting Kuper v. Iovenko, 66 F.3d 1447, 1458 (6th Cir. 1995))
Defendants argued that the complaint should be dismissed because it failed to allege sufficient facts under the Kuper/Moench presumption to establish a plausible basis for challenging the good-faith basis for retaining the shares of GM stock, citing Bell Atl. Corp. v. Twombly, 550 U.S. 544 (2007), and Ashcroft v. Iqbal, 129 S. Ct. 1937, 1949 (2009). But the Sixth Circuit, rejecting the stance of the Second, Third, Fifth and Ninth Circuits, holds that there is no heightened pleading requirement for ERISA ESOP cases and no need, therefore, to allege facts establishing a fiduciary's abuse of discretion in continuing to hold company stock.
The Sixth Circuit, in contrast to the other circuits, has never required that a participant prove that the company was at the stage of "impending collapse" or a "dire situation" before a plan participant must act to reverse investments in company stock. Thus, the court holds that there is no increased burden at the pleading stage to allege facts to overcome the burden of reasonableness in order to survive a motion to dismiss.
Holds the court:
"We recognize that ESOP plaintiffs, having had an opportunity to conduct formal discovery, may come forward with rebuttal proofs of many kinds, depending on the facts of each case. Because Kuper's standard for rebutting the presumption is not as narrowly defined to require proof of a 'dire situation' or an 'impending collapse,' we find it inappropriate to apply it to the pleadings on a motion to dismiss, making the contrary decisions of other circuits distinguishable."
Considering how very technical and difficult these violations may be to prove with out discovery, it is a significant breakthrough for plan participants and beneficiaries that at least one circuit has lowered the threshold for filing such cases.
]]>In a decision last month, the judge conditionally certified this action under the FLSA. Pippins v. KPMG, No. 11-cv-00377-CM-JLC (S.D.N.Y. Jan. 3, 2012). Judge McMahon ordered that notice be sent to past and present Audit Associates and Audit Associates Second at KPMG of this pending lawsuit and of their right to join the case. Class certification (of the New York state law claims) is not yet decided.
More recently, the judge entered two more orders of significance. The first of these affirmed a protective order entered by the magistrate judge on October 7, 2011, requiring KPMG for the present time to preserve several thousand hard drives from laptop computers used by departed Audit Associates. See order of Feb. 3, 2012.
Judge McMahon rejected KPMG's arguments that the preservation burden was onerous, holding that the firm had failed to present factual support for its claim that the costs of preservation outweighed the benefit. The district court noted KPMG's refusal to provide even a small sample of the drives' contents to ascertain the "benefit" of preservation, thus no balancing analysis could be performed. "In short," the court concluded, "KPMG is hoist on its own petard."
The court summarized:
"Frankly, the only things that were unreasonable were: (1) KPMG's refusal to turn over so much as a single hard drive so its contents could be examined; and (2) its refusal to do what was necessary in order to engage in good faith negotiations over the scope of preservation with Plaintiffs' counsel, in purported reliance on an order of this Court that it interpreted unreasonably. It smacks of chutzpah (no definition required) to argue that the Magistrate failed to balance the costs and benefits of preservation when KPMG refused to cooperate with that analysis by providing the very item that would, if examined, demonstrate whether there was any benefit at all to preservation."
The court regarded the magistrate judge's decision as otherwise "perfectly sensible" and "sound litigation management," insofar as it was temporary in duration and the contents of the hard drives are presently unknown. In closing, the court upheld the order for such time "until [KPMG] either: (1) comes to some agreement with Plaintiffs over a sampling methodology, which both sides agree is the appropriate thing to do; or (2) formally abandons its litigation position that, even if Audit Associates generally are found to be non-exempt employees (an issue yet to be resolved), individual Audit Associates perform work that renders them exempt from the FLSA."
In a second order, dated Feb. 7, 2012, the same judge also unsealed documents filed in the court under seal by KPMG. In a two-page order, the court observed that since first raising the issue in June of 2011 - of whether certain exhibits under seal about KPMG's audit policies, practices and procedures ought to be preseved confidentially - the parties never recommended an accounting expert to advise the court about the proprietary nature of the documents. "That can only mean that they agree with my initial impression, which is that there isnothing confidential about KPMG's [documents]."
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