Tenth Circuit follows Gardner-Denver, finding that 14 Penn Plaza does not trump the plaintiff

In Mathews v Denver Newspaper Agency LLP, 2011 U.S. App. LEXIS 11454 (10th Cir. May 17, 2011), a panel of the Tenth Circuit issued its revised opinion. Its earlier opinion of March 16, 2011 is found at 2011 U.S. App. LEXIS 5142. Judge Murphy, writing for the panel, concludes that plaintiff's statutory employment discrimination and retaliation claims may be litigated despite a prior ruling by an arbiter on plaintiff’s contractual claims which were coterminous with his statutory claims.

The collective bargaining agreement provides as follows:

The Employer and the Union acknowledge continuation of their policies of no discrimination against employees and applicants on the basis of age, sex, race, religious beliefs, color, national origin or disability in accordance with and as required by applicable state and federal laws.

Plaintiff was demoted and grieved the demotion. Apparently, the initial grievance referenced state and federal discrimination and retaliation laws. That initial grievance was amended to remove any reference to said statutes, and the question of discrimination was stated, by agreement of the parties, to the arbiter as follows: “[D]id GRIEVANT’S demotion violate contractual provisions prohibiting discrimination?” The arbiter ruled against Mathews and, thereafter, Mathews sued under Title VII among other statutes. The district court found that the arbiter’s decision was preclusive, relying on the Supreme Court’s decision in 14 Penn Plaza LLC v. Pyette, 129 S. Ct. 1456 (2009). The district court’s ruling can be found at 2009 U.S. Dist. LEXIS 37697 (D. Colo. May 4, 2009). The soTenth Circuit reversed, holding the fact that “Mathew’s contractual rights and statutory rights were coterminous is of no moment: As the Supreme Court has recently reaffirmed, ‘[b]ecause the collective-bargaining agreement gave the arbitrator “authority to resolve only questions of contractual rights,” his decision could not prevent the employee from brining the Initial Title VII claim in federal court “regardless of whether certain contractual rights are similar to, or duplicative of, the substantive rights secured by Title VII.” Fourteen Penn Plaza, 129 S.Ct. at 1467 (emphasis added) (quoting Alexander v. Gardner-Denver Co., 415 U.S. 36 (1974)).”

The Tenth Circuit panel went on to affirm summary judgment on plaintiff’s discriminatory demotion claim, finding that plaintiff was judicially estopped from being able to establish his qualifications for the position in question. The court, applying Cleveland v. Policy Mgmt. Sys. Corp., 526 U.S. (1999), found that plaintiff’s unequivocal testimony in a SSA disability milieu that he was totally disabled was “a paradigmatic case for judicial estoppel.” For a different take on this issue, see Solomon v. Vilsack, 628 F.3d 555 (D.C. Cir. 2010).

In contrast, the court denied summary judgment on plaintiff’s retaliatory demotion claim, refusing to adopt the “strong evidence” standard articulated by the Second Circuit in Collins v. N.Y. City Transit Authority, 305 F.3d 113, 119 (2d Cir 2002) wherein that court held that for a plaintiff to survive a motion for summary judgment following an adverse decision from an arbiter, the plaintiff “must present strong evidence that the decision was wrong as a matter of fact - e.g. new evidence not before the tribunal – or that the impartiality of the proceeding was somehow compromised.” Instead of adopting the Second Circuit’s “strong evidence” standard, the Tenth Circuit rejected such a per se standard for a case-by-case evaluation, including an evaluation of the “degree of procedural fairness in the arbitral forum, adequacy of the record with respect to the issue of discrimination, and the special competence of particular arbitrators.” Barrentine v. Arkansas-Best Freight Sys, Inc., 450 U.S. 728, 743 n.22 (1981) (quoting Gardner-Denver 450 U.S. at 60 n.21).

The petition for rehearing filed by defendant Denver Newspaper Agency LLP was directed at the ongoing debate regarding the elements of a prima facie case of retaliation. The Tenth Circuit followed the three-part showing required by Timmerman v. U.S. Bank, 483 F.3d 106, 1122-23 (10^th Cir. 2007) which requires a showing that (1) plaintiff engaged in protected activity; (2) plaintiff suffered an adverse employment action;* (3) there is a causal connection between the protected activity and the adverse action. The debate on rehearing was whether in a retaliation case, the Tenth Circuit panel would reject Timmerman and adopt a standard that some circuits have used which requires, in addition to the three elements above, that plaintiffs demonstrate that they are “qualified for the position at issue, or, if already employed, [had] met the employer’s legitimate work expectations.” Volosek v. Wis. Dep’t of Agric., Trade & Consumer Prot., 344 F.3d 680, 692 (7^th Cir. 2003). See also contrasting decisions on this question from the Fifth Circuit: Holtzclaw v. DSC Commc’ns Corp., 255 F.3d 254, 259-60 (5^th Cir. 2001) (finding that qualification for the job is an element of a prima facie case of ADEA retaliation); EEOC v. Dunbar Diagnostic Servs., Inc., 92 F. App’x 83, 84-85 (5^th Cir. 2004) (refusing to require plaintiff to demonstrate qualification for the position as part of prima facie case in a wrongful discharge case), the appellee’s petitioned panel for rehearing and appellant’s response to same contain citations to and discussion of all of the many court decisions that have addressed this cutting edge debate.

Judge Murphy, who wrote for the panel, was joined by Judges McKay and O’Brien. 

For more discussion on this topic, see Garland’s Digest, Paul Mollica’s Daily Developments in EEO Law, Nelson Cary’s post at Vorys on Labor, and Richard Renner at the Whistleblowers Protection Blog. For a discussion of the District Court’s ruling see the Workplace Prof Blog.

 *While the court described Timmerman as requiring an “adverse employment action,” undoubtedly the court merely used the incorrect phraseology, and would require adherence to the Supreme Court’s holding in Burlington Northern & Santa Fe Ry. v. White, 548 U.S. 53 (U.S. 2006) where the court requires in a retaliation case, not an adverse action, but rather “a materially adverse action.” In Shaw v. Tulsa Dynaspan Arrow Concrete, 2001 WL 263205 at *4 (10^th Cir. Jan. 28, 2001), the Tenth Circuit held that the prima facie case of retaliation requires a showing that a reasonable employee would have found the challenged action materially adverse, quoting Haynes v. Level 3 Communications, LLC, 456 F.3d 1215, 1228 (10^th Cir. 2006).

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Agreements To Maintain Confidential Information

In News America Marketing In-Store, LLC v. Emmel, 2011 U.S. App. LEXIS 11810 (11th Cir. June 8, 2011), the defendant former employee, Robert Emmel, while still employed with the plaintiff former employer, News America, felt that the News America was engaged in various unlawful activity.  He reported the alleged wrongdoing to U.S. Senator Sarbanes and to the SEC, and sent both the senator and the SEC a number of News America company documents to support his claims.  Later, but before News America discovered Emmel’s external disclosures of company documents, the relationship between Emmel and News America soured, and News America terminated Emmel.  Emmel was offered a job with another employer, and needed a letter from News America certifying that he was not bound under any non-compete agreement.  News America agreed to provide such a letter, but only in exchange for Emmel signing a nondisclosure agreement (NDA), which provided that:

Emmel agrees that he will not disparage, denigrate or defame the Company and/or related persons, or any of their respected business products, practices, or services.  Emmel further agrees that he will maintain in complete confidence, and not discuss, share, reveal, disclose or make available to any third party or e  ntity any “Confidential Information” of the Company.”

Emmel signed the NDA on December 21, 2006, but only after he mailed a number of additional News America company documents to a staffer for the U.S. Senate’s Finance Committee on December 20, 2006 – one day before he signed the NDA.  News America later learned of Emmel’s various disclosures of company documents to outside parties and sued Emmel for breach of contract.

News America made two arguments – (1) that certain documents in place when Emmel was employed by News America created non-disclosure obligations – such as News America’s “Standards of Business Conduct Policy”; and (2) that Emmel breached the December 21, 2006 NDA by virtue of the mailing Emmel sent out on December 20, 2006.

Both the District Court and the Eleventh Circuit rejected News America’s first argument, and held that the employment documents in question did not impose contractual nondisclosure obligations on Emmel.

But, the District Court agreed with News America’s second argument, granted News America summary judgment on that aspect of News America’s contract breach claim, and issued a permanent injunction barring Emmel from making any further disclosures of News America’s confidential information.  The court reasoned that, while Emmel mailed out the documents in question the day before he signed the NDA, it was undisputed that the recipient did not receive the package until after Emmel had signed the NDA.  The court found it “significant” that Emmel didn’t do anything to prevent the disclosure after he had signed the NDA – for example, he did not warn the recipient not to view the documents.  The court reasoned that Emmel thereby breached the NDA.

The Eleventh Circuit reversed, based on the verb tense which was used in the NDA.  That is, the NDA provided that Emmel “will not disparage…” – i.e., it was written in the future tense, and therefore did not cover any of Emmel’s past conduct which predated his signature of the NDA.  The court reasoned that nothing indicated that the parties intended the agreement to apply retroactively, or to provide any assurances about past actions.  The court ultimately agreed with Emmel’s arguments that “[t]o capture his pre-contract conduct… the promises would have needed to be phrased in the present perfect tense – i.e., ‘Emmel agrees he has not disparaged… and that he has maintained in complete confidence’ News America’s confidential information,” and that the District Court’s ruling “disregards the basic rule that a contract operates only prospectively from execution absent language of retroactive effect.”

Needless to say, the decision vividly highlights the paramount importance of careful drafting when it comes to writing contracts, employment agreements, employment policies, settlement agreements, and other such documents.
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