Wake Forest Law Review
10Sep

What Is the Appropriate Procedure for Seeking Judicial Review of an Arbitration Award Entered Under the Multiemployer Pension Plan Amendments Act?

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By George Kennedy

On April 21, 2015, the Fourth Circuit issued a published opinion in the civil case of Freight Drivers and Helpers Local Union No. 557 Pension Fund v. Penske Logistics LLC in which it held that commencing an action by filing a complaint is the proper procedure for seeking judicial review of an arbitration award under the Multiemployer Pension Plan Amendments Act (“MPPAA”), reversing the judgment of the District of Maryland. Additionally, the Court held that the amended complaint filed by Freight Drivers and Helpers Local Union No. 557 Pension Fund (“Pension Fund”) was timely because it related back to the original complaint.

Facts Leading up to the Dispute and Arbitration Proceedings

In 2004, Penske Logistics LLC (“Penske”) transferred ownership of its subsidiary, Leaseway Motorcar Transport Company, to a third party. After transferring control, Penske ceased making contributions to the Pension Fund. The Pension Fund responded by assessing withdrawal liability against Penske. Penske refused to pay the withdrawal liability, and soon thereafter, Penske and the Pension Fund submitted their dispute for arbitration.

The parties entered into arbitration proceedings and in July 13, 2012, the arbitrator dismissed the Pension Fund’s claims. The arbitrator decided that Penske was not liable for the withdrawal liability assessed against it because Penske was exempt as “‘a trucking industry fund as that term is described in [29 U.S.C. § 1383(d)].”

The Pension Fund Seeks Judicial Review

Following the arbitrator’s order against it, the Pension Fund sought judicial review of the order by filing a complaint in the District of Maryland on August 9, 2012. Subsequently, Penske filed a motion to dismiss the Pension Fund’s complaint. The District Court granted Penske’s motion, but granted leave for the Pension Fund to amend the complaint within 21 days of the filing of its original complaint.

The Pension Fund filed an amended complaint within 21 days. Again, Penske filed a motion to dismiss the complaint, and again, the District of Maryland granted the motion. In so holding, the District of Maryland argued that the proper mechanism for reviewing an arbitration award under the MPPAA is the filing of a motion under the provisions of the Federal Arbitration Act. As such, the District of Maryland treated the Pension Fund’s amended complaint as a motion, and held that it was deficient for two reasons. First, the Court held that it was untimely because motions cannot relate back pursuant to Federal Rule of Civil Procedure 15. Second, the Court held that it was lacking an attached memorandum stating the authority and reasoning in support as required for motions under Local Rule 105.

The Filing of a Complaint is the Appropriate Procedure

The Fourth Circuit first took up the issue of which procedure is correct for seeking review of an arbitration award under the MPPAA. It held, contrary to the District of Maryland, that the proper procedure is the filing of a complaint, and not the filing of a motion. In so holding, the Fourth Circuit appealed to: (1) the plain meaning of Sections 1401 and 1451 of the MPPAA, (2) the language of related provisions of the MPPAA, (3) the Rules of Civil Procedure, and (4) the legislative intent surrounding the enactment of the MPPAA.

The Fourth Circuit considered, and ultimately dismissed, Penske’s counterargument that Section 1401(b)(3) of the MPPAA is controlling in this case and mandates that judicial review be sought by filing a motion and not by filing a complaint. The Fourth Circuit explained that Section 1401(b)(3) applies only to arbitration proceedings and not to the process of seeking judicial review. Instead, the Fourth Circuit argued that Section 1401(b)(2) of the MPPAA controls judicial review of arbitration awards, and that it states that judicial review is to be sought by filing a complaint, and not a motion.

The Pension Fund’s Amended Complaint is Timely Because it Relates Back

After establishing that the filing of a complaint is the appropriate method for seeking review of an arbitration order under the MPPAA, the Fourth Circuit then ruled on whether the Pension Fund’s amended complaint was timely. The Fourth Circuit held that the amended complaint was timely because it related back to the original complaint pursuant to Federal Rule of Civil Procedure 15. The Court reasoned that since the amended complaint asserted claims arising out of the same conduct underlying the claims of the original complaint, the requirements for relation back under Rule 15 were satisfied. The Court quickly dismissed Penske’s argument to the contrary, holding that it was “hyper-technical, carrying no equitable or pragmatic weight.”

Judgment Reversed and Remanded

Accordingly, the Fourth Circuit reversed the judgment of the District of Maryland, remanding the case for further proceedings.

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10Apr

Court Affirms Denial of Rule 59 Motion

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By Evelyn Norton

Today, in an unpublished per curiam opinion, in the civil case of Wade v. U.S., the Fourth Circuit affirmed the decision of the District Court for the Southern District of West Virginia to deny a motion to alter or amend its judgment.

The District Court Entered Judgment in Favor of Defendant and Denied Plaintiff’s Motion

The district court granted judgment to Defendant following a bench trial.  Subsequently, Plaintiff Tracy E. Wade, Administratrix of the Estate of Richard Brian Wade, filed a motion to alter or amend the judgment pursuant to Federal Rules of Civil Procedure Rule 59.  However, the district court denied Plaintiff’s motion.

Thus, Plaintiff appealed the judgment in favor of Defendant and denial of the Rule 59 motion.  Defendant initially argued that the Fourth Circuit lacked jurisdiction because Plaintiff did not timely file the appeal.  However, the Fourth Circuit ordered the parties to submit supplemental briefs on the issue of whether the district court properly entered judgment on a separate document.

The Fourth Circuit Did Not Lack Jurisdiction

The Federal Rules of Civil Procedure Rule 58 require the essentials of a judgement be set forth in a separate written document from the court’s opinion.  Here, the Fourth Circuit concluded that the district court failed to enter judgment on a separate document, thus giving the Fourth Circuit jurisdiction.

 The District Court Did Not Err or Abuse its Discretion

The Fourth Circuit reviewed the district court’s factual findings for clear error and its conclusions of law de novo.  The Court reviewed the denial of the Rule 59 motion for abuse of discretion.

After considering the record and the parties’ briefs, the Court determined that the facts and legal contentions were already adequately presented.  Thus, the Court dispensed with oral argument because it would not aid in the decision process.  The Court concluded the district court neither erred nor abused its discretion in entering judgement in favor of Defendant and denying Plaintiff’s Rule 59 motion.

District Court Affirmed

The Fourth Circuit affirmed the denial of Plaintiff’s motion to alter or amend the district court’s judgment.

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26Mar

Fourth Circuit Affirms Dismissal of Claims by Target of Assassination Attempt

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By Patrick Southern

On March 25, the Fourth Circuit released a published opinion in the civil case of Johnson v. American Towers, LLC. In its decision, the court affirmed a ruling from the District of South Carolina, declaring that court had properly determined it had jurisdiction over the matter on multiple grounds and had also properly dismissed the claim on the merits.

Plaintiff Was Brutally Attacked In His Home

Plaintiff Robert Johnson worked as a prison guard. He was attacked in his home and shot six times. He survived the attack, and a subsequent investigation revealed that the attack was ordered by an inmate at the prison where he worked, using a contraband cell phone.

The Johnsons sued several cellular phone service providers and owners of cell phone towers (including American Towers), seeking to recover under state law negligence and loss of consortium theories. The defendants fell into two groups: wireless service providers and owners of cellular towers. According to the Johnsons, these defendants were liable for Mr. Johnson’s injuries because they were aware that their services facilitated the illegal use of cellphones by prison inmates and yet failed to take steps to curb that use.

The defendants removed the case to federal court, citing federal question jurisdiction under 28 U.S.C. § 1331 and complete diversity under 28 U.S.C. § 1332. The Johnsons moved to remand to state court, and the District of South Carolina denied the motion on two grounds: (1) that federal question jurisdiction existed because the Federal Communications Act preempted their state law claims, and (2) that diversity jurisdiction existed because the only non-diverse defendants were fraudulently joined and the amount in controversy exceeded $75,000.

The defendants subsequently moved to dismiss the case under Federal Rule of Civil Procedure 12(b)(6). The District Court granted the motion on three grounds: (1) that the Johnsons’ claims were barred by express and conflict preemption; (2) South Carolina law did not impose a duty on the defendants to prevent inmates from illegally using their cell phone services; and (3) the Johnsons’ claims were implausible and so did not meet pleading standards. The Johnsons appealed to the Fourth Circuit.

On Appeal, Plaintiffs Argued on Jurisdictional Grounds In Addition to the Merits of Their Claims

The plaintiffs brought forth two issues the Fourth Circuit considered on appeal.

First, they asked if the District Court had erred in concluding it had federal jurisdiction over the Johnsons’ state law claims. If the Fourth Circuit found federal jurisdiction was proper, they further argued the District Court had improperly dismissed the plaintiffs’ claims on the merits.

The District Court Erred in Finding Federal Question Jurisdiction

The District Court had found federal question jurisdiction existed because the plaintiffs’ state law claims were preempted by the Federal Communications Act. On appeal, the Fourth Circuit noted that this “complete preemption” is rare, and indeed there is a presumption against such preemption. The presumption exists because, in the court’s view, the principles of federalism dictate the judiciary should be careful to not draw an inference that Congressional actions are intended to wipe out wide swaths of state law (at least without some explicit statement as such from Congress).

While the court said the language of the Federal Communications Act constituted “ordinary preemption” it also noted that was not sufficient to create federal subject matter jurisdiction. Only complete preemption can do so. For complete preemption to exist, the preempting statute must provide the exclusive cause of action for claims in the area the statute preempts.

The Fourth Circuit said the Federal Communications Act does not provide the exclusive cause of action in this area, since that statute only permits recovery against common carriers, and the tower owners are not considered common carriers (since they do not provide wireless service). Even though the wireless providers can be sued under the Federal Communications Act, the court noted there was nothing in the Act that indicated Congress intended it to be the exclusive remedy for state law claims against such providers. Indeed, the language of the Act suggests the opposite — that it was not intended to supplant common law and state law remedies.

But Diversity Jurisdiction Allowed the District Court to Hear the Case

With respect to diversity jurisdiction, the Johnsons’ original complaint had named two non-diverse defendants. However, under the “fraudulent joinder doctrine” the District Court was free to remove those defendants and retain jurisdiction over the case. But to do so, there must be a showing that there could not be a claim against the defendants in question even if all questions of law and fact were resolved in plaintiffs’ favor. The standard is obviously plaintiff friendly — if even a “glimmer of hope” of recovery against the defendant at issue is found, it cannot be removed.

But these defendants met that lofty standard. One did not operate towers in the area of South Carolina in question, and so it could not have been found liable for any damages to Mr. Johnson. With regard to the other non-diverse defendant, the Fourth Circuit found that the Federal Communications Act preempted the Johnsons’ claims against it.  Thus, it was also removed properly, and diversity jurisdiction was proper.

The District Court Properly Dismissed the Claims on Their Merits

On three different grounds, the Fourth Circuit agreed with the decision of the District Court to dismiss the Johnsons’ claims.

First, it found that the Communications Act’s express language preempted the Johnson’s claims. The court indicated that the existence of a common law tort duty would obstruct or burden a wireless service provider’s ability to provide coverage. The providers would have to actively monitor their networks to prevent calls coming from inside South Carolina prisons, which would limit their ability to offer wireless service in those areas.

Second, it found the Johnsons’ claims were barred by conflict preemption. Conflict preemption applies to state law “when compliance with both federal and state regulations is a physical impossibility, or when state law stands as an obstacle to the accomplishment and execution of the full purposes and objectives of Congress.” The court found that a state law obligation to block calls from inside South Carolina prisons would conflict with parts of the Communications Act which bar actions to block cell phone signals. The provision in question says that no person shall interfere with any radio communications, including his or her own. Thus, a state law obligation to block the signals inside of prisons would directly conflict with the federal law, making compliance with both impossible.

Finally, it found the Johnsons’ claims were implausible. The court indicated the allegations were “speculative” in nature. The Johnsons’ complaint merely asserted that “an inmate at the prison using a cellphone ordered a coconspirator outside of the prison to kill Captain Johnson.” The Fourth Circuit said the Johnsons failed to offer any further facts to support their claims. Their complaint did not identify the wireless service provider who carried the alleged call, or even when the alleged call occurred. Without more factual allegations, the Fourth Circuit said it would be impossible for a district court to assess the Johnsons’ claims.

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13Feb

The Fourth Circuit Rules No Reversible Error in False Claims Action

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By David Darr

Today, in the civil case of United States ex rel. Prince v. Virginia Resources Authority, an unpublished per curiam opinion, the Fourth Circuit affirmed the decision of the District Court for Western District of Virginia dismissing the plaintiff’s qui tam action under the False Claims Act.

Plaintiff Contended the District Court Improperly Dismissed His Claims

On appeal, the plaintiff contended that the District Court’s dismissal of his qui tam action and subsequent denial of the plaintiff’s motion to alter judgment were reversible error.

The District Court’s Dismissal and Denial of Motion to Amend

Mark Prince brought a qui tam action under the False Claims Act on behalf of the federal government against Virginia Resources Authority (VRA) and other defendants. A qui tam action allows a whistleblower to sue on behalf of the government to recover money, and if successful, the plaintiff recovers some of that money too. Prince contended that VRA and other defendants issued bonds that violated the Virginia Constitution and that VRA falsely claimed that these bonds were legally issued. VRA filed a motion to dismiss for failure to state a claim and lack of jurisdiction because a Virginia state court already decided the issue that the bonds were legally issued in previous case that Prince brought. The District Court decision said that issue was precluded and collateral estoppel was appropriate because the parties at the proceedings were the same, the issue was actually litigated in the prior case, the issue was essential to the prior judgment, and the prior case reached final judgment. Applying collateral estoppel, the District Court dismissed Prince’s claim against VRA. With respect to the other defendants, the District Court dismissed the claims against them because they were never actually served.

In response to the adverse court ruling, Prince filed a “Motion to Reconsider.” The District Court construed this motion as a Rule 59(e) motion to amend judgment because there is no basis in the Federal Rules of Civil Procedure for Prince’s “Motion to Reconsider.” Because Prince’s motion only argued that the judgment was wrong, it was improper for the District Court to grant it. Prince’s motion was more along the lines of what an appellate court should decide. The District Court also clarified in its second opinion that the United States was not precluded from litigating the matter in the future because they were not a party to the original action.

An Appellate Court Reviews Decisions for Reversible Error

The Fourth Circuit’s role in this appeal was to find out whether the District Court made any reversible error.

The Fourth Circuit Found No Reversible Error

The Fourth Circuit reviewed the record from the District Court and agreed with its reasoning for dismissing the case and not allowing the plaintiff to alter the judgment. Therefore, the Fourth Circuit found that there was no reversible error committed by the District Court.

The Fourth Circuit Affirmed the Dismissal

The Fourth Circuit affirmed, holding that the District Court did not commit any reversible error.

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28Jan

Fourth Circuit Not “Playing Games” in Retaliatory Firing Case 

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By Joshua P. Bussen

On Monday, January 26, in the civil case of Jones v. Southpeak Interactive Corporation, a published opinion, the Fourth Circuit established that in a claim for retaliatory firing under 18 U.S.C. § 1514A, part of the Sarbanes-Oxley Act of 2002 (“SOX”), evidence of an administrative complaint that was not answered within 180 days is sufficient to exhaust a plaintiff’s administrative remedies, that such claims under SOX are subject to a four-year statute of limitations, and finally, that under SOX emotional distress damages are available to plaintiffs.

Plaintiff Whistle-Blows on Video Game Developer

In 2009, Andrea Jones (“Jones”), the plaintiff in this case, was serving as the chief financial officer of Southpeak Interactive, the defendant. In February of that year, the company placed an order for over 50,000 video games from Nintendo. Southpeak, however, was in a predicament. It needed the games “as soon as possible” but did not have the funds to cover the cost up front. To avoid a potentially problematic delay, the chairman of Southpeak’s board, Terry Phillips, wired Nintendo $307,400 from his personal account. In May of that year Southpeak had not recorded the debt properly on its balance sheet or its quarterly financial report, which was filed with the Securities Exchange Commission (“SEC”).

When Jones became aware of the improper filing, she reported to Southpeak’s audit committee that she suspected the company was engaged in fraud. In response, Southpeak sought to rectify the improper filing with the SEC by submitting an amendment. In the proposed amendment, Southpeak denied any intentional fraud. Jones was asked to sign the report, and refused. On August 13, 2009, Jones sent a letter to Southpeak’s outside counsel stating that: “I do not know how a conclusion of no intentional wrongdoing or fraud can be reached.” The board of Southpeak convened a special meeting that very same day and fired Jones. This claim for retaliatory discharge under 18 U.S.C. § 1514A(a) ensued.  18 U.S.C. § 1514A(a) states that it is illegal for publicly traded companies to retaliate against employees who report potentially unlawful conduct.

OSHA Filing Was Sufficient to “Exhaust” Administrative Options

On October 5, 2009, Jones filed a complaint with the Occupational Safety and Health Administration (“OSHA”)—claiming her discharge was a retaliation to her reporting the company’s fraud. After 180 days of no action from OSHA, Jones informed the administration that she was electing to file a federal lawsuit pursuant to 18 U.S.C. § 1514A(b)(1)(B) of SOX and 29 C.F.R.§ 1980.114(b).  Her actions were satisfactory to the Fourth Circuit to fulfill her claim for administrative remedies, which were required to be exhausted under the statute.

Retaliatory Discharge Claims Fall Under SOX’s Four-Year Statute of Limitations

Southpeak also sought to have Jones’s claim dismissed for having lapsed the applicable statute of limitations. The Fourth Circuit easily dismissed this argument. Under 28 U.S.C. 1658(a), the section of the law that Jones brought her claim under, a plaintiff has a four-year window to file a claim for retaliatory discharge.

Emotional Distress Damages are Available to Plaintiffs Under SOX

Southpeak, additionally, attempted to have the award of emotional distress damages overturned.  The defendant claimed that this award was improper under SOX, however, the Fourth Circuit found 18 U.S.C. § 1514A(c)(1) instructive. Under that provision of SOX, in a successful claim for a retaliatory firing, a plaintiff may be entitled to “all relief necessary to make [her] whole.” The court read that provision broadly enough to mean that emotional distress damages were to be included.

Was the “Final” Verdict Really Final?

Southpeak, finally, attempted to have the verdict overturned because it claimed the jury was “confused” in its verdict. This argument held little merit to the circuit judges, as the jury was polled by a clerk at the conclusion of the trial—with each juror confirming the verdict—and the decision was not “clearly against the weight of the evidence.” Therefore, the court dismissed the argument.

District Court for the Eastern District of Virginia’s Decision Affirmed

Because the District Court for the Eastern District of Virginia found that the administrative remedy had been exhausted, the claim was not barred by any statute of limitations, that emotional damages were available to Ms. Jones, and that there was no evidence of jury “confusion,” the Fourth Circuit affirmed.

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21Jan

Fourth Circuit Affirms Dismissal of Tort Claim Against State Official

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By Patrick Southern

Today, in Marks v. Dann, the Fourth Circuit affirmed the dismissal of the plaintiff’s claims against the defendant, who was employed as director of a Maryland state agency, the Maryland Venture Fund (“MVF”).

The United States District Court for the District of Maryland previously held that the plaintiff’s claims were barred under the Maryland Tort Claims Act (“MTCA”), and the Fourth Circuit affirmed the plaintiff had failed to meet either possible exception to that law.

Dispute Arises from Conflict With Former Business Partners

The underlying dispute in this case revolves around a company called Maxtena, which manufactures custom antennas. Plaintiff Marks was a co-founder of the company, as well as a former officer and employee of it. He engaged in litigation with Maxtena’s board of directors regarding his departure from the company. While that litigation was pending, Maxtena’s board sold interest in the company to the MVF, which was directed by defendant Dann.

Marks alleged his former colleagues entered into a sweetheart deal with MVF to dilute his stake in the company at an artificially low valuation. Marks then named Maxtena’s board members and Dann as defendants in his lawsuit, alleging Dann colluded with Maxtena’s board and aided and abetted the board in breaching its fiduciary duties to the company by accepting a low valuation for the stake in the company.

Plaintiff Failed to Plausibly Allege Defendant’s Actions Were Malicious or Outside the Scope of Employment

The District Court dismissed Marks’s claims against Dann, holding that he was entitled to immunity from personal liability under the MTCA.  That law couples a waiver of the state’s sovereign immunity from civil suits in state court with protection for state officials who act: (1) without malice and (2) within the scope of their official duties.

The District Court found that Marks’s complaint failed to plausibly allege that Dann’s actions either resulted from malice or were outside the scope of his official duties. It held that Marks failed to show Dann’s negotiations for a low price on MVF’s investment in Maxtena resulted from an improper motive instead of in order to advance MVF’s legitimate commercial interests. It further said Marks’ argument that Dann’s actions were beyond his role at MVF was completely without factual support; indeed, the fact Dann sought to secure stake in Maxtena at below-market value directly contradicts that contention.

Thus, the complaint was dismissed under Federal Rule of Civil Procedure 12(b)(6). Marks then moved for certification of the dismissal as a final and appealable order under Rule 54(b). The motion was granted, and Marks appealed.

Plaintiff Failed to Meet High Bar For Malice and Showed No Activity Outside the Scope of Employment

On appeal, the Fourth Circuit affirmed the judgment of the District of Maryland, holding that Marks’s complaint failed to plausibly allege that Dann’s actions were malicious or outside the scope of his public duties as managing director of the MVF.

The ordinary effect of the MTCA and related waiver of immunity for tort actions is to substitute the liability of the state for the liability of the state employee. Under the MTCA, state officials enjoy immunity even for intentional torts. Marks argued his remedy here should still be against Dann because, in his view, Dann designed the transaction to specifically cause Marks harm, which he said was malicious conduct and outside the scope of Dann’s employment. Dann responded that there was nothing improper about his desire to get the best economic outcome for MVF, and that there was no support in the complaint for Marks’s theory that he colluded with the Maxtena board to harm Marks.

The Fourth Circuit first addressed Marks’ argument related to the “malice” exception to the MTCA. A state official’s conduct is “malicious” if it is “characterized by evil or wrongful motive, intent to injure, knowing and deliberate wrongdoing, ill-will or fraud.” Intent and motive are critical. This is a high bar to meet, requiring more than just reckless or wanton conduct. Instead, it requires “evil motive” to “deliberately and willfully injure” a plaintiff.

The court noted this is difficult to prove in a commercial context, where behavior that may be intended to harm is often equally consistent with permissible financial self-interest. But there must be more to support the inference of malice than the allegation a plaintiff suffered economic injury as a result of a state official’s actions which advance the economic interests of his/her state employer. Marks offered only the allegation he suffered economic injury as a result of Dann’s activities, and there was nothing to infer the conduct was driven by anything but ordinary economic concerns. The complaint included no indication Dann sought terms unrelated to the economics of the transaction, or that the terms were out of the ordinary for such transactions, or that his stance in negotiations was inconsistent with MVF’s commercial interests.

Finally, the court turned to Marks’ argument that Dann’s conduct was outside the scope of his employment as director of the MVF. Under the MTCA, conduct is outside the scope of public duties if it is undertaken for reasons of personal ambition or unauthorized by the state employer.

The court noted the complaint offered no information that allows an inference Dann was acting in his own self-interest instead of the interests of MVF. Instead, the complaint actually showed Dann secured an extremely advantageous deal for the MVF. The most that cold be inferred from the complaint was that Dann was overzealous in attempts to get a good deal for MVF, not that he advanced an agenda to harm Marks or derive some personal benefit.

The Judgment Dismissing Plaintiff’s Claims Against Dann is Affirmed

The Fourth Circuit did not rule on whether any tortious conduct was committed. Instead, it merely affirmed the District Court’s ruling that Marks failed to meet either of the exceptions to Dann’s personal immunity under the MTCA, and noted that if Marks has any remedy for the MVF’s alleged misconduct, it is against the state, not against Dann in his personal capacity.

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13Jan

Public Policy Claim Against Wrongful Discharge Sufficient For Trial

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By Dan Menken

Last Thursday, January 8th, in Weidman v. Exxon Mobil Corp., the Fourth Circuit affirmed the district court’s denial of Plaintiff’s motion to remand and also affirmed the dismissal of all but one of his tort claims. Because the dismissal of one of Plaintiff’s claims was reversed, the Circuit Court remanded the case for further proceedings.

Plaintiff Stated Four Claims Based on Employer’s Conduct

In March 2013, Weidman filed suit against his former employer, ExxonMobil, and ten ExxonMobil employees. Plaintiff alleged that the Medical Department of ExxonMobil committed violations of the law by operating illegal pharmacies and illegally stockpiling large quantities of medication. He further alleged that after he reported the violations to ExxonMobil, an employee of the Medical Department initiated a campaign of retaliation against him. After reporting his colleague’s conduct, Plaintiff stated that ExxonMobil conducted a “sham” investigation concluding that Weidman had not been harassed and that the pharmacies were legal. During a second investigation, Plaintiff reported that one of the investigators admitted to him that ExxonMobil had been operating an illegal pharmacies for years.

Plaintiff then alleged that he was required to participate in a performance improvement plan, which lasted for over a year. Plaintiff contended that the purpose of the meetings was not to improve his performance, but to overburden him with the creation of new tasks meant to cause his failure to perform. He stated that during one of these performance meetings on October 24, 2012, he suffered a heart attack which was a direct result of the stress maliciously inflicted upon him. In mid-December 2012, ExxonMobil extended Plaintiff’s performance plan. ExxonMobil subsequently terminated Weidman’s employment at his next meeting in January 2013 for failing to cooperate with the plan.

Weidman then filed suit asserting four causes of action: (1) fraud based on Appellees alleged retaliation against him despite contrary assurance in the employee handbook and the CEO’s yearly videos; (2) intentional infliction of emotional distress; (3) personal injury based on damage to his heart; and (4) wrongful discharge. Defendant removed the case to the Eastern District of Virginia and moved to dismiss the case. Plaintiff moved to remand the case to state court. The district court dismissed all of Plaintiff’s claims and denied his motion to remand.

First Three Claims Fail to State a Claim

The district court denied Plaintiff’s motion to remand based on the “fraudulent joinder” doctrine, despite the fact that Weidman had named three non-diverse defendants in his complaint. The fraudulent joinder doctrine provides that diversity jurisdiction is not automatically defeated by naming non-diverse defendants. The district court may retain jurisdiction if the non-moving party shows that the plaintiff committed outright fraud in pleading jurisdictional facts, or that “there is no possibility that the plaintiff would be able to establish a cause of action against the in-state defendant in state court.” Mayes v. Rapoport, 198 F.3d 457, 464 (4th Cir. 1999). The Fourth Circuit agreed that Weidman’s claims against the non-diverse defendants had no possibility of succeeding, and thus affirmed the district court’s denial of Weidman’s motion to remand.

The Circuit Court then performed a de novo review of the district court’s dismissal for failure to state a claim. According to Bell Atl. Corp. v. Twombly, a complaint “must contain sufficient facts to state a claim that is plausible on its face.” The Fourth Circuit held that Weidman failed to sufficiently plead his fraud claim by making vague referrals to statements from ExxonMobil’s CEO and members of the Human Resources Department. Moreover, the facts stated in his claim for intentional infliction of emotional distress did not reach the level of “outrageous and intolerable” conduct, and was therefore properly dismissed. The claim for personal injury was also properly dismissed because it only stated a “naked assertion devoid of further factual enhancement,” and thus failed to meet the requirement laid out in Ashcroft v. Iqbal.

Plaintiff Sufficiently Stated Claim For Wrongful Discharge Based on Public Policy

Finally, in regards to Plaintiff’s wrongful discharge claim, Virginia law recognizes three situations in which a litigant may show her discharge violated public policy: (1) where an employer fired an employee for exercising a statutorily created right; (2) when the public policy is “explicitly expressed in the statute and the employee was clearly a member of that class of persons directly entitled to the protection enunciated by the public policy”; and (3) “where the discharge was based on the employee’s refusal to engage in a criminal act.”

Here, the Fourth Circuit reversed the district court’s ruling, stating that Weidman sufficiently stated a claim that he was fired for refusing to engage in a criminal act. Sections 54.1-3310 and 54.1-3435 of the Virginia Code make it unlawful for anyone to practice pharmacy or to engage in wholesale distribution of prescription drugs without a license. Although these sections are not part of Virginia’s criminal code, a violation of these sections lead to criminal penalties. Defendants argue that this claim cannot survive because Weidman failed to cite the statute in his complaint. The Fourth Circuit stated, however, that any deficiency in this regard is merely technical. Therefore, Plaintiff pled sufficient factual detail that he was fired for refusing to participate in “illegal pharmacy distribution activities.”

Case Remanded To Address Wrongful Discharge Claim

Thus, the Fourth Circuit reversed the dismissal of Weidman’s wrongful discharge claim against ExxonMobil and remanded the case for further proceedings.

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18Nov

Clever Drafting Doesn’t Open the Door to Federal Court

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By Chad M. Zimlich

The Fourth Circuit handed down a ruling today, in Martin v. Wood, on an interlocutory appeal from a district court decision denying sovereign immunity to two supervisors at Eastern State Hospital, a state-run hospital in Williamsburg, Virginia. The case was based on alleged violations of the Fair Labor Standards Act of 1938.

The Question of the Proper Defendant

The question before the Court was whether the District Court of the Eastern District of Virginia erred in allowing the named defendants, Jack Lee Wood and Milagros Alcala Jones, to be sued in their individual capacities. To answer this question, the Court had to determine what party was the proper party at interest in the case.

An Alleged Unfair Denial of Overtime Pay

Laura Martin, the plaintiff in this case, was a registered nurse and a former employee of the Eastern State Hospital (“Hospital”) in Williamsburg, Virginia. She alleged damages under the Fair Labor Standards Act of 1938 (“FLSA”), 29 U.S.C. § 201-219, against two of her supervisors for an improper refusal to authorize overtime pay for hours that she had worked in excess of 40 hours per week from November 2010 through January 2012. Because she worked on an hourly basis, and because of “transitional duties” that occurred during shift changes, she claimed she worked about 20 minutes before, and 30 to 90 minutes after her shift was over. She also claimed she regularly worked through her 30 minute lunch. Martin also alleges that when she complained to Jones, her coordinator, Jones refused to take action and chalked Martin’s alleged extra time to “inefficiency.” Furthermore, Martin asserts that Jack Wood, the CEO and director of the Hospital, “willfully and deliberately refused to correct,” the denied overtime.

Her supervisors responded with a motion to dismiss for failure to state a claim and lack of subject matter jurisdiction, claiming they had the same sovereign immunity as the Hospital because their conduct involved official duties on the Hospital’s behalf. As a state-run hospital, it was entitled to sovereign immunity as an agency of the Commonwealth of Virginia. They argued that the actions in the complaint were centered on their official authority, and failed to assert that they had acted in an ultra vires manner, or beyond their positions’ specified powers.

The district court denied the motion, relying on Martin’s assertions that Wood and Jones were being sued in their individual capacities due to alleged “intentional misconduct” that was committed. As this was an Eleventh Amendment question, the defendants were entitled to an interlocutory appeal.

The Implications of the Eleventh Amendment

The FLSA provides that “no employer shall employ any of his employees . . . for a workweek longer than forty hours unless such employee receives compensation for his employment in excess of the hours above specified at a rate not less than one and one-half times the regular rate at which he is employed.” 29 U.S.C. § 207(a)(1). The term “employer” is defined to include “any person acting directly or indirectly in the interest of an employer in relation to an employee and includes a public agency.” Id. § 203(d).

The Eleventh Amendment provides that “[t]he judicial power of the United States shall not be construed to extend to any suit in law or equity, commenced or prosecuted against one of the United States by Citizens of another State, or by Citizens or Subjects of any Foreign State.” This removes jurisdiction over any suit brought against an unconsenting State in federal court by its own citizens. The Hospital is an agency of Virginia, and Virginia has not waived its sovereign immunity. Additionally, all officers acting in an official capacity have sovereign immunity through extension as agents. And though Congress can revoke this immunity as it did with Fourteenth Amendment claims, it did not do so for the FLSA.

This Suit is Really About the State

Martin contended that sovereign immunity does not extend to suits against state officials sued in their individual capacity, and, for this reason, Martin claimed that the Eleventh Amendment did not apply. However, the Court noted that any suit brought only against state officials, especially when it is a federal suit, begs the question of whether the suit should also be against the State.

The Court then turned to whether the State was truly the “substantial party in interest,” and in doing so examined the substance of Martin’s claims. There were five questions that the Court asked, namely (1) were the actions “tied inextricably” to the officials’ duties; (2) who would have borne the desired relief sought by Martin; (3) would the judgment operate against the State; (4) were the officials’ actions motivated by personal interests; and (5) were those actions ultra vires?

Ultimately, Martin’s complaint undid itself in this respect. It alleged that the Hospital failed to pay her overtime due to Wood and Jones’ refusal, that Wood and Jones were Martin’s supervisors, that their authority was to establish and control her hours of work, and that, in exercising that authority, Wood and Jones failed to include overtime hours. Though the complaint alleged that Wood and Jones “acted directly and indirectly in the interest” of the Hospital, the Court notes that there were no actual alleged ultra vires actions.

Cleverly Drafted Complaints Will Not Mask the State as the Proper Party

The Court concluded that “virtually every factor” indicated Wood and Jones were being sued in their official capacities. Therefore, Virginia was the proper party at interest in the case, and the Eleventh Amendment required the suits’ dismissal.

 

 

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6Nov

Summary Judgment on Business Conspiracy and Breach of Contract Claims Affirmed

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By Evelyn Norton

Did the District Court Err in Granting Summary Judgment in Defendants’ Favor?

Today, in Rogers v. Deane, the Fourth Circuit affirmed the decision of the District Court for the Eastern District of Virginia granting summary judgment in the Defendant’s favor.  Plaintiff-Appellant Edwina Rogers argued that the district court erred in granting summary judgment to Defendants Jon Deane and Gaffey Deane Talley, PLLC on Rogers’ claims for breach of contract and statutory business conspiracy.  Further, Rogers’ alleged that the district court should have granted her request for the opportunity to conduct discovery before granting summary judgment to Defendants.

  1. The District Court Did Not Err in Granting Summary Judgment to Defendants on Rogers’ Claim for Breach of Contract.

In reviewing the evidence in the record, the Fourth Circuit concluded that the district court properly granted summary judgment to Defendants on the claim for breach of contract.  The evidence clearly showed Rogers’ alleged damages were not caused by Defendant’s breach of contract.

  1. The District Court Did Not Err in Granting Summary Judgment to Defendants on Rogers’ Claim for Statutory Business Conspiracy.

The Fourth Circuit also concluded that the district court properly granted summary judgment in Defendants’ favor on the statutory business conspiracy claim.  To prevail on a business conspiracy claim under Va. Code Ann. §§ 18.2-499 and 18.2-500, a plaintiff must establish by clear and convincing evidence that a defendant acted with legal malice.  However, the Fourth Circuit found no evidence in the record that Defendants acted with legal malice toward Rogers’ business.  Thus, summary judgment in Defendants’ favor was proper.

  1. The District Court Did Not Err in Granting Summary Judgment to Defendants Without Granting Rogers’ Request for Discovery.

Finally, the Fourth Circuit concluded that granting summary judgment without allowing discovery was proper.  Under Rule 56(d) of the Federal Rules of Civil Procedure, summary judgment should be refused if the nonmovant has not had the opportunity to discover information essential to the nonmovant’s opposition.  However, the request should be denied if if the additional evidence to be obtained through discovery would not create a genuine dispute of material fact sufficient to defeat summary judgment.  In this case, the Fourth Circuit found no basis in the record for concluding that discovery would produce evidence creating a genuine dispute of material fact.  Accordingly, the Fourth Circuit affirmed the district court’s grant of summary judgment in Defendant’s favor without first granting Rogers’ request to conduct discovery.

Decision Affirmed

The Fourth Circuit affirmed summary judgment in favor of Defendants on both the breach of contract and statutory business conspiracy claims.

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9Oct

Truck Driver’s Termination not Racially Motivated

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By: Steven Franklin

Today, in Perry v. Mail Contractors of America, Inc., the Fourth Circuit affirmed the Western District of North Carolina’s Order granting the Defendant’s Motion for Summary Judgment against a Title VII claim for wrongful termination. The Plaintiff, Craig Perry, a person of color, claimed that Mail Contractors of America, Inc. (MCA) terminated him from his position as a truck driver because of his race.

McDonnell Douglas Corp. v. Green, sets the Fourth Circuit’s framework for a claim of discriminatory discipline. To establish a prima facie case, the plaintiff must demonstrate that (1) he engaged in prohibited conduct similar to that of a person of another race, and (2) disciplinary measures enforced against him were more severe than those enforced against the other person.

First, Mr. Perry was unable to provide evidence of a truck driver receiving less punishment for an accident similar to his. Mr. Perry was terminated because he failed to reduce his speed despite having visibly hazardous road conditions directly ahead of him. Although he did show evidence of numerous other drivers in accidents that involved other vehicles, caused property damage, or resulted in traffic citations, they did not involve the kind of culpable conduct evident in Mr. Perry’s accident.

Second, there was evidence that MCA terminated an individual who was not a member of a protected class, but was involved in a similar accident shortly after Mr. Perry’s. The employees who terminated Mr. Perry were the same ones who terminated this subsequent individual. For these reasons, Mr. Perry was unable to establish a prima facie case, and the Fourth Circuit affirmed the District Court’s Order granting MCA’s Motion for Summary Judgment.

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9Oct

Zero Damages Against WMATA Police Officer Affirmed

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By Evelyn Norton

Today, in Hutcherson v. Lim, the Fourth Circuit affirmed the decision of the United States District Court for the District of Maryland to deny Hutcherson’s motion for a new trial.

In the District Court, Hutcherson sought relief for personal injuries sustained during a routine traffic stop.  Specifically, Hutcherson alleged that Lim, a Washington Metropolitan Area Transit Authority police officer, assaulted Hutcherson while issuing a citation for illegal window tints.

Following a three-day jury trial, the jury found that Hutcherson had proven assault and battery claims against Lim.  Yet, the jury awarded Hutcherson zero dollars in compensatory damages because Hutcherson’s wife failed to prove loss of consortium.  Twenty-nine days later, Hutcherson moved for a new trial pursuant to Rule 59 of the Federal Rules of Civil Procedure.  The District Court denied the motion.

On appeal, Hutcherson alleged that (1) the District Court improperly admitted a medical evaluation into evidence; and (2) the jury’s award of zero damages is inconsistent with its verdict.

First, Hutcherson argued that a final medical evaluation from his physician was inadmissible hearsay.  The medical evaluation expressed uncertainty as to whether Hutcherson’s partial rotator cuff tear occurred during the incident at issue.  However, testimonial evidence was also offered.

In considering the District Court’s actions, the Fourth Circuit stated that it will not “set aside or reverse a judgment on the grounds that evidence was erroneously admitted unless justice so requires or a party’s substantial rights are affected.” Creekmore v. Maryview Hosp., 662 F.3d 686, 693 (4th  Cir. 2011).  The Fourth Circuit concluded that, even assuming that the District Court erred, the evidence was not sufficiently prejudicial to affect the outcome of the case.  As a result, the medical evaluation’s admission did not affect Hutcherson’s substantial rights. Thus, the Fourth Circuit would not set aside the District Court’s judgment on this basis.

Second, Hutcherson argued that the jury’s award of zero damages is inconsistent with its verdict. While the jury found that Hutcherson proved his assault and battery claims, Hutcherson did not object to the damages award until after the jury’s discharge.  As a result, the Fourth Circuit concluded that Hutcherson waived his objection to any alleged inconsistencies.

Thus, the Fourth Circuit affirmed the District Court’s order denying Hutcherson’s motion for a new trial.

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8Oct

Fourth Circuit Denies Retaliation Claim Under Title VII

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By Joshua P. Bussen

Today, in Rome v. Development Alternatives, Inc., the Fourth Circuit affirmed the grant of summary judgment on a retaliation claim brought under Title VII. The plaintiff claimed, in the District Court of Maryland, that she had been constructively discharged by Development Alternatives, Inc., (“DAI”) after complaining about improper conduct by another employee. In granting summary judgment for the defendant, the district court held that the plaintiff, Heather Rome, had failed to present sufficient evidence to establish a prima facie case of retaliation.

Rome worked for DAI in its Venezuelan office attempting to promote democracy. While in the United States in 2008 Rome complained about one of her coworkers to DAI management. DAI responded by: issuing the coworker a warning, sponsoring team-building exercises, and sending a mentor to the Venezuelan office. Later that year Rome left work on approved leave; she would not return. Rome complained that she had to undergo surgery and was unable to come back to work. DAI told Rome that it would help her to find a position at any office she liked in the company once she was able. Eventually Rome stopped answering DAI’s calls. DAI allowed her to retain her benefits until March 2009, at which time it finally concluded that she had abandoned her employment.

Title VII of the Civil Rights act prohibits “employer retaliation on account of an employee’s having opposed, complained of, or sought remedies for, unlawful workplace discrimination.” 42 U.S.C. § 2000e–3(a). In the lower court, Rome did not present direct evidence of retaliation, therefore the district court reviewed her claim under the well know “burden-shifting framework.” Under this framework, if the plaintiff shows that “(1) she engaged in a protected activity; (2) her employer acted adversely against her; and (3) the protected activity was causally connected to the adverse action,” the burden shifts to the employer to “present a legitimate non-retaliatory reason for the alleged adverse action.” If the employer is then successful in meeting its burden, the employee has a chance to show that the proffered reason is a mere pretext. Further, “constructive discharge” takes place when a defendant employer, motivated by unlawful bias, subjects an employee to intolerable working conditions.

Rome was successful in arguing that she had engaged in a protected activity by reporting her coworker, however, the circuit court found that she had not suffered an adverse action. It further found that she had failed to produce evidence tending to prove pretext. DAI was very accommodating in offering to help Rome, she just never came back to work. On this basis, the Fourth Circuit affirmed the lower court’s grant of summary judgment for DAI.

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