Employer that lied about reason for employee's discharge nevertheless entitled to summary judgment

The case of Holland v. Washington Homes, Inc., No. 06-1309 (May 25, 2007) (PDF) is an interesting application of the McDonnell-Douglas burden shifting framework. It may be the only case I have seen where an employer obtained summary judgment even after admitting that it lied about the reason for the employee's discharge.

Holland, a black salesperson for Washington Homes, Inc., was discharged from his employment after his immediate supervisor transferred him to a less-desirable position. He was able to make out a prima face case of race discrimination because (1) he is a member of a protected class; (2) he was fired; (3) his job evaluations were satisfactory; and (4) his position was filled by a similarly-qualified white candidate.

Washington Homes put forward uncontested evidence that it terminated Holland because its decisionmaker (DeCesaris) believed that Holland was making physical threats toward his supervisor. Although Holland denied he actually made the threats, that was irrelevant since it was uncontested that the decisionmaker believed that he did. Therefore, the employer proffered a legitmate, nondiscriminatory reason for the firing, shifting the burden back to the employee.

This is where things get interesting.

Holland then offered uncontested proof that Washington Homes provided the Maryland Department of Labor, Licensing, and Regulation with an entirely different basis for Holland’s termination than its proffered reason: it reported that Holland had been "laid off" for lack of work. It also told the Department that his date of termination was later than it really was.

Normally, uncontested evidence that the employer lied and gave two inconsistent reasons for termination would satisfy the "pretext" element of the McDonnell-Douglas framework and entitle the plaintiff to a jury, but not here.

Instead, the Court proceeded to consider the employer's reason for the inconsistent positions, and it found the following:

Washington Homes claims it took these two steps to be charitable to Holland. By pushing his termination date a few days forward, Washington Homes allowed Holland’s retirement benefits to vest. Second, by reporting that Holland was laid off, Washington Homes allowed Holland to seek unemployment benefits from Maryland. Regardless of whether this was "stupid" and "criminal" under Maryland law (Reply Br. at 1), it does nothing to discredit DeCesaris’s statement that he fired Holland because he (the decisionmaker) believed that Holland had threatened his supervisor.

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That Washington Homes, as part of its employment reporting responsibilities, thereafter reported a different reason and date of termination to a state employment agency does not cast doubt on the decisionmaker’s proffered reason or create a genuine and material issue of fact. Rather, it shows later charity on the company’s part, and there is nothing in the record to suggest otherwise. In fact, Holland has put forth no evidence that contradicts Washington Homes’ assertion that it inaccurately reported his termination date and reason solely to benefit Holland. Moreover, Holland does not argue that the inaccurate reporting somehow benefitted Washington Homes, or that the company had some hidden motive.

Thus, the majority looked beyond the sheer mechanics of the McDonnell-Douglas framework and looked at the caliber of the evidence as a whole. It found that the evidence of pretext offered by the plaintiff was too weak to carry the day for the plaintiff in the mind of any reasonable juror. Even though the plaintiff technically offered evidence of pretext, the evidence was so easy to disprove that no reasonable juror could rely on it to cast doubt on the proffered nondiscriminatory reason.

Judge King wrote a strong dissenting opinion accusing the majority of usurping the jury's role as assesor of credibility: "Put simply, it is for a jury, not an appellate court, to decide whether Washington Homes was being charitable or, instead, that its conflicting positions constitute evidence of discriminatory misconduct. ... Because Washington Homes admittedly lied to the Maryland Agency, a jury, under settled evidentiary principles, including the maxim of falsus in uno, falsus in omnibus ("false in one thing, false in all"), would be entitled to disregard all of its evidence concerning Holland’s termination." He felt the majority was viewing the evidence in a light most favorable to the moving party: "Put simply, we should not — on summary judgment review — credit the position of an admitted liar."

Judge King's position is weakened, though, by the fact that the employee who fired Holland was not the same person who told the "charitable lie" to the unemployment agency. In the minds of the majority, the fact that the actors were not the same person was important. (See footnote 6). "[A]lthough a reasonable trier of fact would conclude that Washington Homes reported a different reason and date, when combined with the company’s innocuous reasoning for these decisions and Holland’s failure to present any other evidence — beyond baseless speculation — that DeCesaris’s stated reason was pretextual, that trier of fact 'would be hard-pressed to conclude that this established pretext.'" (citation omitted).

Judge King felt this determination went beyond the scope of the McDonnell-Douglas framework. Although I see his point, I think the majority was right to view the evidence in its totality to see if "sufficient evidence [existed] favoring the nonmoving party for a jury to return a verdict for that party." In its view, because both the proffered reason for discharge and the proffered reason for the lie to the unemployment agency were uncontested, the majority felt there really was no other reasonable conclusion for the jurors to make but that the proffered, nondiscriminatory reason was the real reason for the termination.

Incorporation by reference saves the day

In order to avoid repeating themselves in pleadings, lawyers will "incorporate by reference" all of the previous paragraphs, rather than restate them in each count. In Adkins v. Crown Auto, Inc., No. 05-2057 (4th Cir. May 18, 2007) (PDF), the practice allowed the plaintiff to argue two bases of fraud at trial instead of just the one that was clearly spelled out in the fraud count.

The plaintiff purchased a used Huyndai Tiburon that she was led to believe had undergone minor repairs, and had mileage of 9,480 miles. In fact, the car had been "clipped" together from the remnants of two separate wrecked and salvaged vehicles. While the front half was a 2001 with mileage of 9,480 miles, the rear half was a 2000 model with more than 20,0000 miles.

The complaint contained a common law "actual fraud" count that specifically mentioned the mileage misrepresentation, but did not mention the dealer's failure to tell the plaintiff the car was a "clipped" car. However, the count did contain a provision incorporating by reference the "Statement of Facts" section of the complaint, which did mention the misrepresentations and concealment of the extensive repairs and the clipping.

The case went to trial, and the defendant sought to limit the plaintiff's evidence to the allegations under the "Actual Fraud" heading. It argued that the plaintiff should be confined to the theory that the sole misrepresentation on which the plaintiff relied was that the mileage of the whole car was but 9,480 miles. The court permitted the plainitff to present evidence of both the mileage misrepresentation and the concealment of the clipping, which led to a verdict for the plaintiff. On appeal, the Fourth Circuit affirmed:

... the paragraph 34 allegation [alleging misrepresentation as to mileage], together with other allegations made in the "Statement of Facts" and incorporated by reference into the "Actual Fraud" claim, state with sufficient particularity the broader mileage-and-clipping theory of the fraud claim. Cf. Superior Bank, F.S.B. v. Tandem Nat’l Mortgage, Inc., 197 F. Supp. 2d 298, 314 (D. Md. 2000) (recognizing that, where fraud counts incorporate by reference all preceding paragraphs of complaint, "an examination of the entire [complaint] is necessary" to determine if pleading requirements of Rule 9(b) are satisfied). ... We therefore reject the Crown Auto appeal and affirm the judgment entered in favor of Adkins.

The practice tip: To avoid pleading fraud with insufficient particularity under Rule 9(b), state your fraud count last and incorporate by reference all preceding paragraphs of the complaint.

Fourth Circuit dismisses First Amendment claims against Judge Frye

In Mary Lou Smith and Greg Smith v. Hon. Andrew N. Frye, Jr., No. 06-1801 (4th Cir. May 18, 2007) (PDF), the Fourth Circuit affirmed the dismissal under Rule 12(b)(6) of a suit brought by a former magistrate court clerk who was fired by Mineral County Circuit Judge Andrew Frye after her son filed as a candidate for the position of circuit clerk. The suit claimed the discharge of clerk Mary Lou Smith, an at-will employee, violated both Plaintiffs' federally-protected First Amendment rights.

The district court held that Ms. Smith's suit failed to state a claim because she did not exercise any First Amendment rights prior to her discharge, and that the son's claims failed for lack of standing. The Fourth Circuit affirmed.

The clerk of the magistrate court serves at the will and pleasure of the chief circuit judge. After Smith's adult son filed to run for circuit clerk, an elected position, Chief Judge Frye expressed concerns over potential conflicts of interest and the proper functioning of the local judicial system, and he terminated Ms. Smith's employment. The Smiths filed suit under 42 U.S.C. § 1983 alleging that Frye fired Ms. Smith because he believed she supported her son's candidacy, and not that of the incumbent circuit clerk. The Fourth Circuit held that even if that were true, no cause of action existed under § 1983.

The Court found that Ms. Smith did not state a First Amendment claim for violating her speech rights under the so-called McVey test named for McVey v. Stacy, 157 F.3d 271, 277-78 (4th Cir. 1998). Because the first prong of the 3-prong McVey test requires that the "public employee . . . have spoken out as a citizen . . . on a matter of public concern," id., the court found Ms. Smith’s claim failed because she had not spoken or expressed herself in any way.

The tougher question was whether Ms. Smith stated no First Amendment associational rights claim. The Court found no associational claim under the Elrod-Branti line of cases. Elrod v. Burns, 427 U.S. 347 (1976), and Branti v. Finkel, 445 U.S. 507 (1980). The Elrod-Branti line of cases establishes that a public employee may not, consistent with the First and Fourteenth Amendments, be terminated for her political affiliation or lack thereof. These cases concern the political practice of patronage, or conditioning public employment on party membership or support. The cases generally involve either a public official punishing employees for their affiliation or nonaffiliation with a particular political party, or firings motivated by the official's desire to reward loyal supporters for their affiliation with him.

This case did not fit into either paradigm, according to the Court. "In each of the above-cited cases ... there is a clear and direct connection among the supervisor’s own political association, that of the terminated employee, and the adverse employment action. There is no such connection here. ... Judge Frye dismissed Ms. Smith from her at-will employment as magistrate court clerk ... neither in the heat of his own campaign nor during a victory housecleaning. We do not find that Ms. Smith alleges a constitutional violation here, and therefore affirm the district court’s dismissal of her claims."

The Court went on to note that even if Ms. Smith had made out a viable claim, qualified immunity would have protected Judge Frye.

For his part, Mr. Smith claimed that his First Amendment rights as a candidate for public office were chilled by Judge Frye’s allegedly retaliatory firing of Mr. Smith’s mother. Additionally, he claimed to have suffered the injuries of indignity, embarrassment, and emotional distress because he felt responsible for his mother’s discharge. His claim was dismissed for lack of standing because "Quite simply, under the circumstances of this case, an adverse employment action against Ms. Smith does not create a concrete and particularized violation of any legally protected right of Mr. Smith’s."

In her concurring opinion, Judge Motz joined the majority opinion except for its determination that Ms. Smith failed to allege a cause of action for violation of her First Amendment rights. She believed that in her complaint Ms. Smith alleged sufficient facts to state a claim, but that qualified immunity would protect Judge Frye from liability.

The majority opinion noted at several points that it was not clear from the record whether the magistrate clerk position was a policymaking position, for which dismissals for reasons of patronage are constitutionally permissible. See Branti, 445 U.S. at 518 ("[T]he question is whether . . . party affiliation is an appropriate requirement for the effective performance of the public office involved.")

New notary law in Virginia

For those of you who are licensed in Virginia, be sure to check out HB 2058. The new law provides for electronic notarizations beginning July 1, 2008, but the law also contains a few other changes that are effective July 1, 2007. Most notable is the following provision:

§ 47.1-15. Prohibitions.

A notary shall not:

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3. Notarize a signature on a document without notarial certificate wording on the same page as the signature.

This provision has some real estate practitioners worried because oftentimes, real estate documents have a slew of signatures at the end with the notary certifications on other pages. The article I saw in today's Virginia Lawyers Weekly noted that some Freddie Mac and Fannie Mae forms may no longer be usable in Virginia unless they are modified to comply with this new law.

The new law also requires that "[n]ear the notary's official signature on the notarial certificate of a paper document, the notary shall affix a sharp, legible, permanent, and photographically reproducible image of the official seal," § 47.1-16(C) (emphasis added), meaning raised seals may not be in compliance if they cannot be picked up on a photocopier.