Appellate Update — and a Happy New Year

By Joe Murray

For the last post of the year, I’m doing my normal case roundup. It’s been several months since I last posted — thank you to everyone who submitted posts this fall! — so this is a long one. I’ve inserted which laws are addressed in each case if you’re looking for something specific. Finally, I wish everyone Happy Holidays and a great New Year.

Grabowski v. Hartford Life & Accident Ins. Co., No. 17-2108 (4th Cir. Sep. 4, 2018) (unpublished) (ERISA): Every time I see a case name with an insurance company I hope it’s something juicy and not an ERISA case; I’m always disappointed (sorry ERISA attorneys). There is nothing groundbreaking in this case: The plain language of the plan gave Hartford discretionary authority to determine eligibility and construe and interpret the policy. Because Hartford had the discretion to award benefits, a court is limited in its review “only for abuse of discretion and . . . must not disturb the . . . decision if it is reasonable, even if [we] would have reached a different conclusion.”  Since Hartford’s decision was reasonable, the 4th Circuit upheld the denial of benefits.

Lamm v. Branch Banking & Trust Co., No. 16-1970 (4th Cir. Sep. 6, 2018) (unpublished) (NC tort claims): When you settle alleged bank fraud claims with the United States government for $254,236.78, it’s going to be really tough to prove claims that your termination was somehow procured wrongfully. Lamm worked for BB&T for nearly 30 years, last as a corporate banker. Lamm incorrectly coded the transfer of money between accounts as “new money,” which would provide Lamm greater compensation under BB&T’s incentive compensation plan. Evans, Lamm’s former supervisor and a defendant, reported Lamm’s actions and also raised concerns about two of Lamm’s prior incentive compensation reports. After an investigation, BB&T terminated Lamm and reported him to the Secret Service.

Lamm sued BB&T for negligent supervision and Evans for tortious interference of contract and malicious and wrongful attachment. The trial court granted defendants summary judgment on all claims, and the 4th Circuit upheld the grant of summary judgment. As for BB&T, the 4th Circuit found that Lamm failed to forecast any evidence that Evans committed any tortious act. As for the tortious interference claim against Evans, Lamm failed to show that Evans acted “without legal justification,” i.e., legal malice. Finally, the 4th Circuit found that Evans abandoned his wrongful attachment claim by failing to argue the underlying attachment proceeding terminated in his favor—the 4th Circuit also noted that Lamm could not credibly make such an argument since his settlement resulted in a “substantial forfeiture.”

Smith v. NC Dep’t of Pub. Instruction, No. COA17-1361 (N.C. App. Sep. 18, 2018) (NCHRA): I’ve been doing this long enough not to be surprised at what people do, and yet I’m continually amazed when people blow up their careers and then have the audacity to be surprised by their termination.

The Department of Public Instruction (DPI) employed Smith as a section chief in the Student Certification and Credentialing Section. While Smith received overall “Very Good” evaluations, his conduct raised concerns. A list of Smith’s actions specific to this case include (there’s way more): got in an argument with a coworker in which he shouted at and put a finger in the coworker’s face; “liked” LinkedIn posts with a sexual theme; and told a candidate he was interviewing the following: he did not get along with his boss, he was discriminated against as a male, he was thinking about filing a lawsuit, the first interviewee hit it out of the park, and that the candidate should call him on his personal cell if she wanted to withdraw her application. Surprise, she did. DPI terminated Smith for unacceptable personal conduct, and after four days of hearings before an ALJ, Smith’s termination was upheld.

Smith appealed the ALJ’s findings, and I’m going to ruin the ending: he lost. First, Smith alleged that two paragraphs out of the four-page, single-spaced dismissal letter were insufficient to provide him the notice required under the North Carolina Human Resources Act (NCHRA). The court easily swatted this argument to the side by noting that the dismissal letter provided plenty of notice and even if those two paragraphs were insufficient, that the remaining paragraphs were more than sufficient to support his termination.

Next, Smith argued there was not just cause for his termination. To determine if just cause exists to support a termination based on unacceptable personal conduct, courts use a three-part test: “(1) whether the employee actually engaged in the conduct the employer alleged; (2) whether the employee’s conduct falls within one of the categories of unacceptable personal conduct; and (3) whether the misconduct constitutes just cause for the disciplinary action taken.” In addressing Smith’s argument, the court first noted that Smith did not challenge the ALJ’s findings of fact regarding the altercation with a coworker, his LinkedIn activity, and his conduct in the interview. Since Smith did not contest these findings, they were binding on the court and supported that he engaged in the alleged activity. Next, the court had no problem finding that the uncontested facts “constituted conduct unbecoming a State employee that is detrimental to State service,” which is unacceptable personal conduct. Finally, for the third prong of the test, the court found that termination was warranted—the NCHRA “does not immunize workers from discharge after engaging in the type of longstanding insubordinate and highly inappropriate behavior that occurred here.”

EEOC v. Baltimore Cty., No. 16-2216 (4th Cir. Sep. 19, 2018) (ADEA): This case is an exemplar of swift justice bringing relief to discriminated employees. Just kidding. This is the third appeal of a case that started in 1999 and 2000—1999 and 2000!—when two employees filed charges of discrimination with the EEOC alleging age discrimination based on the requirement that employees contribute more to the County’s retirement system the older the employee is when he or she joins the system. Prior to this appeal, the EEOC managed to obtain partial summary judgment finding the contribution requirements violated the ADEA. After the parties agreed to a consent order to equalize the contribution rate, the EEOC moved for retroactive monetary relief, in the form of back pay. The district court denied the EEOC’s motion, and the EEOC appealed to the 4th Circuit.

On appeal, the County argued the ADEA grants courts broad authority “to grant such legal or equitable relief as may be appropriate,” including the denial of back pay. The EEOC argued that certain provisions of the ADEA incorporate that FLSA, which uses the “shall be liable” language regarding back pay, and therefore, the district court did not have discretion to deny an award of back pay. Using the standard statutory interpretation framework and the Supreme Court’s decision in Lorillard v. Pons, 434 U.S. 575, 577 (1978), which addressed a different ADEA provision that also incorporated the FLSA, the 4th Circuit held that “retroactive monetary awards, such as the back pay sought here, are mandatory legal remedies under the ADEA upon a finding of liability.”

Watlington v. Dep’t of Soc. Servs. Rockingham Cty., COA17-1176 (N.C. App. Oct. 2, 2018) (NCHRA): Take my comment in Smith and double it here.

During her three years of employment, Watlington accepted a gift of jewelry from a foster family; allowed families under her supervision to buy her food; used money intended for a child’s group home for her own benefit; accepted a cash loan from a foster parent under her supervision; and gave a bassinet to a foster parent without permission. All of these actions violated written policies of Rockingham and resulted in Watlington’s termination. After an initial hearing before an ALJ and first appeal to the court of appeals, the ALJ upheld Rockingham’s decision to terminate Watlington.

On appeal, the main issue before the court of appeals was what alleged unacceptable personal conduct was “current.” Under the NCHRA,[i] an employee may be terminated “for a current incident of unacceptable personal conduct.” Watlington argued that only the gift of jewelry was current and all of the other actions occurred too long before her termination to be part of any just cause analysis. The court noted that the NCHRA did not define “current” and there were no cases interpreting the NCHRA’s use of current. The court looked at Renfrow v. N.C. Dep’t of Revenue, 245 N.C. App. 443 (2016), which addressed the use of the term “current” in similar provisions for state employee discipline. The court noted that it did not set a definite time limit on “current” in Renfrow, but rather stated “where employee misconduct is not readily discoverable, whether the misconduct is a ‘current incident’ depends on the amount of time that elapsed between the employer’s discovery of the misconduct and the contested disciplinary action.” The court applied Renfrow to Watlington’s case and found that since the ALJ found that Rockingham discovered the misconduct and terminated Watlington all within five days, all six of the alleged acts of misconduct could be considered “current.” Based on the totality of the circumstances, the court upheld the ALJ’s finding that Rockingham had just cause to terminate Watlington.

Hamlet H.M.A., LLC v. Hernandez, No. COA17-744 (N.C. App. Oct. 16, 2018) (UDTP): Time to amend every lawsuit involving disputes over business agreement between physicians and medical practices (or maybe even attorneys and law firms), at least until the North Carolina Supreme Court weighs in. In this case, the court of appeals ruled that the “learned profession” exemption to North Carolina’s unfair and deceptive trade practices act does not cover strictly business disputes unrelated to the learned profession. There was a dissent, so the supreme court will have to address this case in the future.

Briefly, Dr. Hernandez and Hamlet entered into a Physician Recruitment Agreement; after about 18 months, the parties had a falling out. As part of the claims and counterclaims, Dr. Hernandez alleged a UDTP claim based on alleged false representations that led Hernandez to enter into the agreement. The trial court issued a directed verdict on this claim based on the learned profession exemption. The court of appeals stated that while physicians and hospitals clearly meet the definition of a learned profession, it was unclear if independent contractor agreements are the rendering of professional services. After acknowledging instructive, but not controlling cases, the court found that strictly business disputes unrelated to the rendering of professional services were not covered by the learned profession exemption, even if one or more of the parties were in a learned profession. One caveat is that the court noted in passing that if Hernandez had been an employee of Hamlet, the decision may have been different. Judge Mark Davis dissented from this part of the decision, setting up a supreme court review.

Nzabandora v. Rectors and Visitors, No. 17-2350 (4th Cir. Oct. 19, 2018) (Title VII): See Sean Herrmann’s excellent summary of this case here.

Rouse v. Forsyth Cty., No. COA17-884 (N.C. App. Nov. 6, 2018) (NCHRA): It’s never a good sign for the employer when, in the opening paragraphs of the facts section, a court says this about an employer’s policy: it’s unwritten, there’s no training on the policy, employees didn’t quite understand how to properly follow it, and there was no review to ensure proper compliance. Unsurprisingly, Forsyth lost at both the ALJ and court of appeals stages in justifying its termination of Rouse under the NCHRA (there’s more to it than the policy, but again, just not a good sign for the employer that early in the opinion).

The more important takeaway from this case is that there is no authority for an ALJ to award county employees back pay or attorney’s fees under the regulations of the NCHRA. These remedies are limited to state employees.

Netter v. Barnes, No. 18-1039, 2018 U.S. App. LEXIS 32358, (4th Cir. Nov. 15, 2018) (Title VII): Joseph E. Hjelt wrote a great summary of this case for last week’s post.

Carter v. St. Augustine’s Univ., No. COA17-1008 (N.C. App. Nov. 20, 2018) (unpublished) (Wage and Hour, REDA): A 29-page opinion that is unpublished, and 21 of those pages are the legal analysis. Sometimes courts make it hard for me to summarize these cases in three or fewer paragraphs.

In early 2014, Plaintiffs repeatedly complained about St. Augustine’s failure to pay one Plaintiff (Lytch) wages. In May 2014, St. Augustine terminated 12 employees as part of a RIF and reassigned 31 other employees. Both Plaintiffs were originally part of the RIF but were not terminated at the time. In June 2014, Plaintiffs escalated their complaints about the lack of pay to the interim president. The day after their last complaint, and following a tense meeting about their complaints with their supervisor, they were terminated.

Plaintiffs filed suit for unpaid wages under the Wage and Hour Act and for retaliatory discharge under REDA and common-law wrongful termination, as well as punitive damages.[ii] A jury found in favor of both Plaintiffs on all claims, and the trial court denied St. Augustine’s motion for JNOV. The Plaintiffs requested treble damages instead of punitive damages, which the trial judge granted. The judge awarded minimal costs to Plaintiffs and denied their motion for attorney’s fees. Everyone appealed.

The court of appeals denied St. Augustine’s appeals on the REDA and wrongful discharge claims by stating that it is the provenance of the jury to weigh the evidence. While St. Augustine presented evidence that Plaintiffs were to be RIFed, the jury could find in Plaintiffs’ favor solely based on their termination one day after the last complaint and confrontation, as well as other supporting circumstantial evidence. As for the awards of punitive damages and treble damages under REDA, however, the court found that the trial court failed to support these awards by addressing the evidence to support the findings of willful and wanton conduct for punitive damages or willful violation for REDA. The court therefore remanded these claims back to the trial court to make the proper findings of fact and law.

Airfacts v. De Amezaga, No. 17-2092 (4th Cir. Nov. 20, 2018) (trade secrets): I’m only noting this case because it’s a published opinion. Airfacts sued De Amezaga, a former employee, under Maryland law for breach of contract and conversion, as well as misappropriation of trade secrets under the Maryland Uniform Trade Secrets Act. If you’re looking for cases with fact patterns on former employees misappropriating trade secrets and taking documents, you may want to at least skim this decision.

Reyazuddin v. Montgomery Cty., No. 17-2103 (4th Cir. Nov. 21, 2018) (unpublished) (Rehabilitation Act): Sometimes winning doesn’t feel so good: Reyazuddin successfully convinced a jury that the County failed to accommodate her, but it awarded her $0. Then the trial court denied her request for equitable relief since the County subsequently moved her into an equivalent job.

Reyazuddin, who is completely blind, worked in a call center for the County and used an audio program to access computer software. The County ultimately consolidated all of its call centers into a central location; however, the new location’s customer service program would not work with the audio program. The County then assigned Reyazuddin to a number of “insufficient or not meaningful” jobs. Reyazuddin sued the County under the Rehabilitation Act and the ADA for disability discrimination. The trial court awarded summary judgment on both claims, but the 4th Circuit reversed and remanded the Rehabilitation Act claims for trial. At trial, the jury found the County failed to provide an appropriate accommodation but awarded Reyazuddin $0. After the jury found the County had violated the ADA, but before the district court considered the equitable relief claims, the County placed Reyazuddin into a comparable position at the new call center. Because the County had now accommodated Reyazuddin, the Court denied the request for equitable relief.

The accommodations the County provided Reyazuddin were significant and in some cases eliminated or significantly changed essential job functions. For instance, she could only take one type of call versus two for all other employees; she had to complete service requests in a different manner; she couldn’t work remotely; and she could not independently do quality review of her requests. Based on these differences, Reyazuddin appealed the denial of equitable relief based on the elimination of essential job functions and how those changes affected her performance and promotional opportunities. The 4th Circuit easily upheld the district court’s ruling. First, the 4th Circuit noted that the Rehabilitation Act doesn’t prohibit employers from changing how employees perform, or even eliminating, essential job functions. Second, the court noted that employers may shift an employee’s duties to fit the employee’s capabilities. Finally, the court noted that these changes had not affected Reyazuddin’s performance or limited her ability to obtain a promotion. Based on these factors, the 4th Circuit upheld the denial of equitable relief.[iii]

Ray v. Int’l Paper Co., No. 17-2241 (4th Cir. Nov. 28, 2018) (Title VII): While not germane to the decision, it’s never a good look for an employer when it conducts two investigations into a supervisor’s alleged sexual harassment, concludes the supervisor is lying or engaged in some of the conduct, doesn’t discipline the supervisor (just tells him to knock it off), and the conduct apparently continues.

Ray underwent 10 years of sexual harassment from her supervisor before finally complaining in 2013, 2014, and 2015. Around the same time that her supervisor learned of her 2013 complaint, which he confronted her about, the supervisor told Ray she could no longer perform “voluntary” overtime work before the beginning of her regular work shifts—a significant cut in her ability to earn extra income. Ray was still required to work mandatory overtime. Ultimately, in 2015, Ray filed suit under Title VII for both hostile work environment and retaliation. The district court awarded IPC summary judgment based on the supervisor’s harassing conduct not being imputable to IPC and Ray not establishing a prima facie case of retaliation.

On appeal, the main issue was if the denial of voluntary overtime hours constituted an adverse employment action. IPC argued that Ray made more money from overtime work in 2015 than 2014, showing that the supervisor’s actions did not result in a tangible employment action. The 4th Circuit was not impressed with this argument. The court noted that it has previously recognized that a decrease in hours that reduces an “employee’s take-home pay” can constitute a tangible employment action. The court then found that a jury could find that eliminating an employee’s ability to earn extra money through voluntary overtime constituted a significant change in Ray’s benefits. Further, the court found that Ray’s actual take home pay was not the issue, it was the opportunity to work the voluntary overtime hours that was the issue—Ray could well have earned even more in 2015. Having found that the supervisor’s action in baring Ray from voluntary overtime hours was an adverse action, the 4th Circuit easily found that Ray had produced sufficient evidence to defeat summary judgment on both the hostile work environment and retaliation claims.

McCormick v. America Online, Inc., No. 17-1542 (4th Cir. Nov. 29, 2018) (FAA): Not an employment case, but the 4th Circuit addressed how to determine subject-matter jurisdiction over a motion to vacate or modify an arbitration award under § 10 or § 11 of the Federal Arbitration Act. The 4th Circuit held that the court is to look at the underlying claims, and if those claims could be litigated in federal court, then “the § 10 or § 11 motion can likewise be resolved in federal court.”

Rodriguez v. Elon Univ., No. 18-1589 (4th Cir. Nov. 30, 2018) (unpublished) (Title VII): There’s not much meat to this opinion upholding summary judgment in favor of Elon on Rodriquez’s Title VII claims. Rodriguez failed to prove his prima facie case because the supervisor he complained about actually recommended Rodriguez for tenure, eliminating any inference of discrimination; he failed to identify a comparator; and since Elon offered Rodriguez a one-year contract after denying him tenure, he could not prove constructive discharge. I want to congratulate one of our section members, Richard Rainey with Womble Bond Dickinson, on obtaining and successfully defending the summary judgment.

Staudner v. Robinson Aviation, Inc., No. 17-1928 (4th Cir. Dec. 7, 2018) (LMRA): After reading this case I know more about the Labor Management Relations Act than before, but that’s not saying much. The big take away is that “the exhaustion requirement under § 301(a) is a nonjurisdictional precondition to suit rather than a jurisdictional limit.” The 4th Circuit, however, did not determine “if exhaustion is an element of an employee’s cause of action or an employer’s affirmative defense,” since this labor agreement did not actually require exhaustion.

Simmons v. New Hanover Cty. Sch. Sys., No. COA17-1329 (N.C. App. Dec. 18, 2018) (unpublished) (unemployment): And finally, what meets the definition of misconduct connected to the work under the North Carolina Unemployment Act? This: Refusing, after being told three times, to stop your school bus in a safe place so police can assist you with a student who is repeatedly opening the emergency exit while the bus is moving—and who ultimately jumps out at a stop light. Oh yeah, and you were driving with a drink in one hand and failed to look both ways at a railroad crossing, both policy violations. Finally, when you get back to school with the busload of kids, you state, “take the kids and do . . . whatever you want to with them because I’m not taking them home.” That is misconduct that will prevent you from getting unemployment benefits.

[i] The NCHRA applies to county employees who work in the mental health, social services, health, and emergency management departments unless the county has created a consolidated county human services agency. N.C. Gen. Stat. §126-5(a)(2). There are some slight differences in the NCHRA regulations for state employees and county employees.

[ii] St. Augustine made some counterclaims as well. It received a nominal $1 on one of those claims.

[iii] The 4th Circuit also upheld the denial of injunctive relief. In doing so, the 4th Circuit noted that United States v. Gregory, 871 F.2d 1239 (4th Cir. 1989) did not eliminate a trial court’s discretion not to grant equitable relief.