Wake Forest Law Review
5Feb

Fourth Circuit Weighs in on When an Employer-Required Medical Exam Can Violate the Americans With Disabilities Act

Categories: 4th Cir. Blog Issues in the 4th Circuit
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By Katy Thompson and Lanie Summerlin

          In Equal Employment Opportunity Commission v. McLeod Health Inc., Cecilia Whitten (“Whitten”) was employed by McLeod Health, Inc. (“McLeod”) for twenty-eight years as the editor of McLeod’s internal employee newsletter[1].  Whitten was born with postaxial hypoplasia of the lower extremity, so she lacks certain bones in her feet, legs, and right hand. Therefore, Whitten has limited mobility and has always struggled with falling.[2]  In 2012, Whitten fell three times: twice outside of work and once at work.  As a result, McLeod required Whitten to undergo several fitness-for-duty exams.[3]  McLeod concluded that Whitten was a high-fall risk.  Whitten proposed several reasonable accommodations, but McLeod determined that these accommodations would prevent Whitten from fulfilling her job’s essential function of travelling to the company’s different campuses to collect stories.[4]  Whitten was placed on medical leave and ultimately terminated.[5]

            Whitten filed a complaint with the Equal Employment Opportunity Commission (“EEOC”), prompting EEOC to bring a suit against McLeod on Whitten’s behalf. The district court granted summary judgment to McLeod on both claims and the EEOC appealed.[6]  The issue before the Court was whether McLeod violated the Americans with Disabilities Act (“ADA”) by (1) requiring Whitten to undergo medical exams despite a lack of evidence that the exams were necessary (“illegal-exams” claim); and/or (2) terminating Whitten on the basis of her disability (“wrongful-discharge” claim).[7]

EEOC’s Arguments

            On appeal, the EEOC argued that summary judgment was not appropriate on either claim because there was sufficient evidence for a reasonable jury to rule in favor of the EEOC.[8]

            Under the ADA, an employer may not require an employee to undergo a medical exam unless the exam is job-related and consistent with business necessity.  Specifically, the employer must reasonably believe the employee’s ability to perform an essential job function is limited by a medical condition or that, due to a medical condition, the employee’s performance of an essential job function would pose a direct threat to the safety of the employee or others.[9]  The EEOC appealed summary judgment on the illegal exams claim by arguing that it had provided enough evidence for a reasonable jury to conclude that travelling to the company’s different campuses was not an essential function of Whitten’s job.[10]  McLeod’s description of Whitten’s position did not include travelling to McLeod’s campuses, and Whitten could gather information for the employee newsletter over the phone.  Also, the EEOC argued that McLeod’s belief that Whitten’s falls made her a direct threat was unreasonable because her falls did not cause injury.[11]

            Furthermore, to establish a wrongful-discharge claim a plaintiff must prove (1) she has a disability; (2) she is a qualified individual; and (3) her employer took adverse employment action against her because of her disability.[12]  The EEOC claimed that the first and third elements were clearly met and that it had presented enough evidence on the second element to preclude summary judgment.[13]  A qualified individual must be able to perform the essential functions of the job with or without a reasonable accommodation.[14]  The EEOC argued that a reasonable jury could determine, based on the evidence presented for the illegal-exams claim, that Whitten was a qualified individual because travelling was not an essential function of her job.[15]

McLeod’s Arguments

            On appeal, McLeod argued that summary judgment on both the illegal-exams claim and the wrongful-discharge claim was appropriate.[16]

            Specifically, in regards to the illegal-exams claim, McLeod argued that it did not violate the ADA by requiring Whitten to undergo work-related medical exams because it reasonably believed, based on objective evidence, that Whitten could not perform an essential function of her job without posing a direct threat to herself.[17]  McLeod claimed, and the district court agreed, that one of the essential functions of Whitten’s job was to navigate to and within the medical campuses.[18]  Thus, McLeod argued, the medical exams did not violate the ADA because McLeod believed Whitten’s disability rendered her unable to travel to and within the company’s different campuses without posing a direct threat to herself.[19]

            With respect to the wrongful-discharge claim, McLeod argued that summary judgment was appropriate because Whitten was not a “qualified individual” within the meaning of the ADA.  Specifically, McLeod asked the Court to affirm on the basis that the EEOC had not proven Whitten was a “qualified individual;” the medical exams indicated she could not perform an essential function of her job, regardless of whether she was provided with a reasonable accommodation.[20]

Holding: Summary Judgment Inappropriate as to Both Claims

            The Fourth Circuit reversed summary judgment on both claims and remanded the case to the lower court.[21]  Reviewing the grant of summary judgment on both claims de novo, the Court disagreed with the district court’s determination that McLeod had showed there was no genuine dispute as to a material fact; therefore, summary judgment was inappropriate.[22]

            The Court examined the evidence presented by both parties but disagreed with the district court’s finding that the EEOC failed to produce enough evidence for a jury to rule in its favor.[23] The Court acknowledged that the record contained evidence supporting McLeod’s position that it reasonably believed, based on objective evidence, that Whitten could not navigate to or within its campuses without posing a direct threat to herself.[24]  Based on the testimony of one of Whitten’s superiors, as well as her own testimony agreeing that her job required her to “safely navigate marketing department functions,” the Court found that a reasonable jury court rule in favor of McLeod.[25]

            However, the Court also found that a reasonable jury, based on the evidence presented in the lower court, could rule in favor of the EEOC.[26]  The Court looked at McLeod’s own written description of Whitten’s job, which contained no mention of navigating to and from company events or conducting in-person interviews.[27]  Although Whitten testified that she believed she collected better content by travelling to McLeod’s campus locations, she did not believe it was an “essential” function of her job because she could collect information and conduct interviews over the phone.[28]  Because the Court determined that the EEOC had produced “more than a scintilla of evidence” in support of its position that navigating to and from McLeod’s campus locations was not an essential function of Whitten’s job, the Court reversed summary judgment as to the illegal-exams claim.[29]

            The Court noted that even if the EEOC had failed to produce enough evidence that navigating to and from campus locations was an essential function of her job, McLeod would still not be entitled to summary judgment.[30]  The Court analyzed what McLeod knew before it required Whitten to take the medical exams; specifically, that (1) McLeod knew Whitten had performed the essential function of her job for twenty-eight years, despite her disability; (2) Whitten had recently fallen several times (once at work), none of which resulted in any severe injuries; (3) Whitten missed deadlines, came in late, and struggled with her workload; and (4) Whitten’s supervisor noted she recently appeared winded and groggy.[31]  The Court determined that a reasonable jury, based on the evidence, could have found that McLeod lacked a reasonable, objective basis for requiring Whitten to undergo work-related medical exams.[32]

            As to the wrongful-discharge claim, the question at issue was whether the EEOC had produced enough evidence to convince a jury that Whitten was a “qualified individual” within the meaning of the ADA.[33]  The Court noted that the district court, in analyzing the “wrongful-discharge” claim, relied on its finding that navigating to and from McLeod’s campus locations was an essential function of Whitten’s job.[34]  Because the medical exams had revealed that no reasonable accommodation would permit Whitten to perform that function, the district court concluded that the EEOC had not proven Whitten was qualified to continue her work with the company’s employee newsletter.[35]  However, because the Court had already determined that it was uncertain whether navigating to and from McLeod’s campus locations was an essential function of Whitten’s job, and because the medical exams may have been unlawful, the Court held that McLeod was not entitled to summary judgment.[36]

Conclusion

            Ultimately, the Fourth Circuit held that McLeod was not entitled to summary judgment on either of the EEOC’s ADA claims and remanded for further proceedings.[37]  The Court held that a reasonable jury could conclude that travelling was not an essential function of Whitten’s job.[38]  If a jury made this determination, then there could be sufficient evidence (1) that McLeod’s required medical exams were illegal; and (2) that Whitten was illegally terminated on the basis of her disability.[39]  This case is important because it provides an example of the level of evidence a plaintiff must offer to survive a summary judgment motion on ADA claims.  Also, this ruling sends a message to employers that the Fourth Circuit takes ADA claims very seriously, and it could encourage the EEOC to bring more ADA claims in this circuit.

[1] No. 17-2335, 2019 WL 385654, at *1 (4th Cir. Jan. 31, 2019).

[2] Id.

[3] Id. at *2.

[4] Id. at *3.

[5] Id.

[6] Id.

[7] Id.

[8] Id.

[9] Id.

[10] Id. at *4.

[11] Id.

[12] Id. at *5.

[13] Id.

[14] Id.

[15] Id.

[16] Id. at *3.

[17] Id. at *4.

[18] Id.

[19] Id.

[20] Id. at *5.

[21] Id.

[22] Id. at *3.

[23] Id. at *4–5.

[24] Id. at *4.

[25] Id. at *4.

[26] Id.

[27] Id.

[28] Id.

[29] Id.

[30] Id.

[31] Id.

[32] Id. at *5.

[33] Id.

[34] Id.

[35] Id.

[36] Id.

[37] Id.

[38] Id. at *4.

[39] Id. at *5.

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16Nov

Weekly Roundup – 11/12-11/16

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By Jim Twiddy and Kayla West

United States v. Miguel Zelaya

In this criminal case, the Fourth Circuit affirmed the trial court’s convictions of Miguel Zelaya, Luis Ordonez-Vega, Jorge Sosa, and William Gavidia. Each were convicted of participating in a racketeering conspiracy under the Racketeer Influenced and Corrupt Organizations Act (“RICO”). Some of the defendants were also convicted of committing violent crimes in related and unrelated events. Appellants were members in the gang, MS-13. Each of the defendants were charged with violent action associated with their racketeering activity. Sosa and Gavidia moved for severance because they had not been charged with murder, unlike the other defendants. Ordonez-Vega moved to exclude testimony from New York police officers who had knowledge about his previous gang affiliation in New York. Sosa moved for mistrial based on a witness’ reference to an uncharged MS-13 murder during her testimony to establish Sosa as a gang member. Gavidia moved for a new trial following the verdict. All four Appellants moved for a judgment of acquittal based on insufficient evidence. All of these motions were denied. Appellants raised multiple issues on appeal including the denial of their motion for acquittal. Sosa and Gavidia challenged the denial of their motions for severance and new trials, Ordonez-Vega challenged the admission of certain evidence, Sosa challenged the jury instructions, and Gavidia challenged his sentence. The Fourth Circuit addressed each of these challenges in turn, articulating the relevant standard for each conviction and applying that standard for the facts relevant to each challenge. Essentially, all of these claims turned on whether there was sufficient evidence for a reasonable jury to come to the conclusions from the trial court. In each of these challenges, the Fourth Circuit found that there was sufficient evidence to support all of the jury’s findings. All of challenged trial court holdings were affirmed. Judge Floyd, dissenting in part, argued that, with respect to some of these convictions, the government lacked sufficient evidence to show that the violence was connected to membership in a gang.

 

Catherine D. Netter v. Sheriff BJ Barnes

In this civil case, Appellant argued that her unauthorized review and disclosure of confidential personnel files to support her racial and religious discrimination claims constituted protected activity under Title VII. Appellant filed a complaint with her employer and the EEOC. Appellant reviewed, copied, and supplied the confidential personnel files to support her claims. After she was discharged by her employer, she filed a new charge with the EEOC. The EEOC dismissed the charged but allowed her to supplement her existing Title VII discrimination complaint with a new retaliation claim. After discovery, the district court granted summary judgment to Appellant’s employer on all claims. Appellant filed an appeal, challenging only the portion of the district court’s order that concerns her retaliation claim. The Fourth Circuit held that Appellants actions were in violation of N.C. Gen. Stat. § 153A–98(f) which establishes a Class 3 misdemeanor for “knowingly and willfully examin[ing] . . . , remov[ing] or copy[ing] any portion of a confidential personnel file” without authorized access. Further, illegal actions do not constitute a protected activity for participation clause claims under Title VII. Thus, the Fourth Circuit affirmed the decision of the district court.

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14Sep

Weekly Roundup: 9/10 – 9/14

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By: Matthew Hooker

De Reyes v. Waples Mobile Home Park Limited Partnership

In this case, the Plaintiffs (four Latino couples) had sued the landlord of a mobile home park under the Fair Housing Act (“FHA”). The landlord required all individuals who lived in the park to provide proof of legal status in the United States. The Plaintiffs contended that this policy violated the FHA because it disproportionately impacted Latinos as compared to non-Latinos. In granting the landlord’s motion for summary judgment, the District Court ruled that the Plaintiffs had failed to establish a prima facie case to properly connect the disparate impact to the landlord’s policy. The Fourth Circuit disagreed, noting that the Plaintiffs had provided statistical evidence to demonstrate the disparate impact of the policy on Latinos. The Court also pointed out that while the Plaintiffs’ legal status might cause them to be unable to satisfy the policy, their claim was premised on disparate impact based on race. Thus, the Court clarified that the Plaintiffs’ legal status was essentially irrelevant, although the District Court had suggested otherwise. The Court therefore vacated the District Court’s grant of summary judgment and remanded the case for the District Court to properly consider the burden-shifting analysis under an FHA disparate impact claim.

Sierra Club v. Virginia Electric & Power Company

Here, the Sierra Club had sued Virginia Electric & Power Company d/b/a Dominion Energy Virginia (“Dominion”) under the Clean Water Act. Dominion had stored coal ash in a landfill and in settling ponds. It later detected arsenic leaching from the coal ash and seeping into the surrounding groundwater. Sierra Club alleged that Dominion had unlawfully discharged pollutants into navigable waters (violating 33 U.S.C. § 1311(a)) and violated certain conditions of its coal ash storage permit. After a bench trial, the District Court found Dominion violated § 1311(a) but ruled that Dominion did not violate the permit conditions. Both parties appealed. The Fourth Circuit held that the landfill and settling ponds were not “point sources” under the Clean Water Act, so they were not subject to § 1311(a)’s prohibitions. The Fourth Circuit agreed, though, with the District Court giving deference to the Virginia Department of Environmental Quality’s (VDEQ) interpretation of the permit conditions, since VDEQ issued the permit. Consequently, the Fourth Circuit reversed the District Court regarding the violation of § 1311(a) and affirmed with respect to the District Court’s ruling on the permit conditions.

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11Nov

Weekly Roundup – 11/6-11/10

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Weekly Roundup: 11/6-11/10
By: Tim Day & Jonathan Hilliard

Plotnick v. Computer Sciences Corp.
             In this civil case, the plaintiffs, former executives of Computer Sciences Corporation (“CSC”), filed suit against CSC, alleging they were denied benefits under their Deferred Compensation Plan for Key Executives after an amendment to the plan changed the applicable crediting rate.  The Fourth Circuit affirmed the district court’s grant of summary judgment for CSC, holding that the denial of benefits was proper under any standard of review.

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27Mar

Fourth Circuit Reverses Dismissal of Prisoners’ Complaint for Mootness

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By John Van Swearingen

On March 24, 2017, the Fourth Circuit issued a published opinion in the prisoner civil rights case Porter v. Clarke. Plaintiffs, originally four Virginia death row inmates, filed a complaint in the United States District Court for the Eastern District of Virginia alleging that the conditions of their confinement amounted to cruel and unusual punishment violative of the Eighth Amendment. One inmate was executed during the course of this action, leaving three inmates as Plaintiffs. Defendants, the Director of the Virginia Department of Correction and the Warden of the Sussex I State Prison, thereafter changed the policies at issue in the complaint. The district court subsequently dismissed Plaintiff’s action for mootness. Plaintiffs timely appealed, claiming their action is not moot.

Facts and Procedural History

In November 2014, when Plaintiffs filed this lawsuit, the Virginia Department of Corrections was operating under a pair of 2010 policies that governed the living conditions of death row inmates. Plaintiffs spent twenty-three hours a day in seventy-one-square-foot cells, alone, with a steel bed, a desk, and a combination commode-and-sink. Death row inmates could not have “contact” visits with anyone; all visitation was separated by plexiglass. The warden had unlimited discretion in granting contact visits with immediate family under “extreme circumstances.”

Inmates were allotted one hour of “outdoor recreation” five days a week. This consisted of an empty outdoor cell similar in size to the inmates’ living cells. Inmates had zero access to any group behavioral, educational, vocational, or religious services.

In August 2015, Defendants established new interim guidelines permitting death row inmates one-and-a-half-hour weekly contact visits with immediate family, one-and-a-half-hour weekend and holiday contact visits with other approved visitors, one-and-a-half-hour outdoor recreation sessions five days a week, daily one-hour indoor recreation sessions with up to three other inmates, and a daily fifteen-minute shower. Defendants built a new outdoor recreation area for group activities and an indoor recreation dayroom for group behavioral, educational, vocational, and religious services.

In December 2015, Plaintiffs and Defendants filed cross-motions for summary judgment. Defendants never explicitly moved for dismissal on the grounds of mootness. At the motion hearing, Defendants also noted that they would not take any action binding them to the new guidelines, stating instead that the fluid nature of corrections require that they be able to increase security back to “lockdown status” if need be.

In May 2016, the district court requested an update from Defendant’s on the status of the interim guidelines. Defendants filed an affidavit stating they had updated to new policies providing one-and-a-half-hour outdoor recreation five days a week, one-hour indoor recreation with up to four inmates daily, fifteen minute daily showers, weekly one-and-a-half-hour contact visitation sessions with immediate family and one approved other visitor, non-contact weekend and holiday visitation, and extended visitation sessions granted on a case-by-case basis. Per Defendants’ affidavit, the new policies will be reviewed annually and updated in no later than three years.

In July 2016, the district court granted summary judgment for Defendants’ despite the Defendants’ refusal to neither admit that the pre-2015 inmate conditions violated the Eighth Amendment nor offer any guarantee that the pre-2015 policies would not be restored. The lower court dismissed the Plaintiff’s cross-motion as moot, and Plaintiffs timely appealed.

Mootness Requires More Than a Voluntary Cessation of the Challenged Behavior

Under Article III § 2 of the United States Constitution, federal courts are deprived of subject matter jurisdiction when litigation ceases to involve a “case or controversy.” In other words, as noted by the United States Supreme Court in Powell v. McCormack, “a case is moot when the issues presented are no longer ‘live’ or the parties lack a legally cognizable interest in the outcome.” 395 U.S. 486, 496 (1969).

However, in City of Mesquite v. Aladdin’s Castle, Inc., the Supreme Court also noted that “a defendant’s voluntary cessation of a challenged practice does not deprive a federal court of its power to determine the legality of the practice.” 455 U.S. 283, 289 (1982). As noted by the First Circuit in ACLU of Mass. v. U.S. Conference of Catholic Bishops, a savvy litigant could otherwise render itself immune to litigation by voluntary ceasing a challenged behavior upon the filing of a complaint, then resume that behavior following dismissal for mootness. 705 F.3d 44, 54–55 (1st Cir. 2013).

Instead, a Defendant seeking dismissal for mootness must, pursuant to the Supreme Court’s holding in Friends of the Earth, Inc. v. Laidlaw Environmental Services (TOC), Inc., meet the heavy burden of showing that “it is absolutely clear the allegedly wrongful behavior could not reasonably be expected to recur.” 528 U.S. 167, 190 (2000). This burden is not met if, as in the Fourth Circuit’s decision in Pashby v. Delia, a defendant retains the authority to reinstate a challenged policy. 709 F.3d 307, 316–17 (4th Cir. 2013).

Nothing here bars Defendants from returning to the original policies addressed in Plaintiff’s complaint. Indeed, they have stated that the policies may be reinstated in some form if a situation demanded “lockdown” of the inmates. Further, Defendants expressly refused to commit to the revised policies or admit that the original policies violated Plaintiff’s Eighth Amendment rights. The Fourth Circuit expressly declined to support or denounce the original policies, noting that there may be valid “penological rationale” for reverting to the original policies as described if a situation rendered those policies appropriate. However, the Fourth Circuit noted that this very possibility rendered the dismissal of Plaintiff’s complaint for mootness improper.

Disposition

The Fourth Circuit reversed the district court’s judgment and remanded for further proceedings. Since Defendants expressly retained the discretion to reinstate the policies challenged by Plaintiffs, the voluntary dismissal of those policies did not render the action moot.

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22Mar

Fourth Circuit Reaffirms Contract Interpretation Principles in Collective Bargaining Agreement Between Retirees and Company

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By M. Allie Clayton

Today, in the civil case of Barton v. Constellium Rolled Products-Ravenswood, LLC., a published opinion, the Fourth Circuit affirmed the District Court in granting summary judgment for the company. The court stated that the governing collective bargaining agreement did not provide for vested retiree health benefits, and thus the former employer was within their power to unilaterally alter its retiree health benefits program.

Facts

A class of retirees and their union, The United Steel, Paper and Forestry, Rubber, Manufacturing, Energy, Allied Industry & Service Workers International Union AFL-CIO/CLC (“The Union”), filed this action. The union had represented the retirees since 1988 and had negotiated collective bargain agreements with their previous employer—Constellium Rolled Products-Ravenswood, LLC (“Constellium”).

The Parties’ Agreement

There was a specific provision of their collective bargaining agreement (“CBA”) that governed group health insurance benefits: Article 15. The 2010 provision of Article 15 stated:

  1. The group insurance benefits shall be set forth in booklets entitled Employees’ Group Insurance Program and Retired Employees’ Group Insurance Program, and such booklets are incorporated herein and made a part of the 2005 Labor Agreement by such reference.
  2. It is understood that this agreement with respect to insurance benefits is an agreement on the basis of benefits and that the benefits shall become effective on July 15, 2010, except as otherwise provided in the applicable booklet, and further that such benefits shall remain in effect for the term of this 2010 Labor Agreement.

In addition to Article 15 and the various booklets incorporated by reference therein (which operated as summary plan description (“SPD”)), Constellium (or its predecessors) and retirees agreed to further parameters governing retiree health benefits that were contained in “Cap Letters.” The cap letters throughout the years governed how Constellium (or its predecessors) would allocate health care spending of employees based on pre- and post-January 2003 retirees. The third cap letter, which took effect on January 1, 2011, was unique in that it took effect after the concurrently-negotiated collective bargaining agreement did.

The Unilateral Change Leading to Litigation

While the parties were negotiating a new CBA in July 2012, Constellium proposed a change to Article 15 that would extend the cap on its contributions to retiree health benefits to those who retired before January 1, 2003, and freeze its Medicare Part B premium reimbursement amount for all hourly retirees at $99.90. The Union refused to bargain about this issue because it asserted that the retiree health benefits had already vested. Constellium notified the Union that it planned to make those changes on January 1, 2013, and made those changes on that day.

Procedural History

After discovery, the parties filed cross-motions for summary judgment. The district court granted the company’s motion and dismissed the case.

The Issue

Did Constellium’s unilateral alteration of those benefits breach its obligations under the CBA?

Reasoning

The Supreme Court in M&G Polymers USA, LLC v. Tackett stated that courts must “interpret collective-bargaining agreements, including those establishing ERISA plans, according to ordinary principles of contract law, at least when those principles are not inconsistent with federal labor policy.” Therefore, as this court was interpreting the collective bargaining agreement with the parties, it was bound by ordinary contract principles. Those ordinary contract principles included the rule that states that in order to find that the retiree health benefits vested, there must be unambiguous evidence that indicates that the parties intended that outcome.

The Fourth Circuit found that the plain language of the CBA and the SPD indicated that the benefits did not vest. They found that there was explicit durational language in the retiree health benefits SPDs. Bolstering that conclusion was the contrast of the retiree health benefits section with a different section of the SPD that stated unambiguously that the pension plans cannot be reduced and they are paid monthly for the participants. Because the language was unambiguous in another section, it clearly demonstrated that the parties knew how to express their intent that certain benefits should vest.

Disposition

Because there were clear temporal limitations on the employee health benefits, the retirees’ and the Union’s arguments that the benefits had already vested cannot be upheld. Therefore, the grant of summary judgment in favor of Constellium by the district court is affirmed.

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21Mar

Fourth Circuit Vacates Grant of Summary Judgment Based Solely on Estimate of Damages

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By Kelsey Hyde

On March 17, 2017, the Fourth Circuit published an opinion in the civil matter of Sharma v. USA International, vacating the district court’s grant of summary judgment and remanding for further proceedings. In departing from the lower court’s ruling, the Court found the U.S. District Court for the Eastern District of Virginia improperly granted the defendant’s motion for summary judgment based solely on the contested issue of plaintiff’s purported damages.

Factual & Procedural Background

The plaintiffs in this case, Jatinder Sharma & his corporation Haymarket Fast Foods, Inc., were involved in a business transaction with defendants Khalil Ahmad and Mahrah Butt, partners at USA International, LLC. Sharma became interested in purchasing two restaurants– a Checkers and an Auntie Anne’s– from defendants upon learning how these restaurants were generating high sales. Throughout negotiations for the purchase of these restaurants, Sharma reviewed USA International’s tax returns and financial statements, which indicated the combined sales of the restaurants for the most recent months were about $75,000 per month.

The parties’ first purchase agreement specified a price of $720,000, and made the sale contingent on the stores collectively acquiring $90,000 in monthly sales in the two months prior to a settlement. Subsequent financial statements revealed lower monthly sales, thus the price was later reduced to $600,000 and the conditional-sale provision was eliminated from the final agreement. Sharma formed the entity Haymarket Fast Foods, Inc. in relation to the transaction, and also applied for a loan at his bank to secure part of the purchase price. His application represented that the restaurants’ average monthly sales based on the figures presented in the financial statements provided by defendants.

Shortly after the closing, Sharma noticed sales well below the figures that had been conveyed by defendants. Sharma looked further at other elements of the business– namely the supply orders, employee’s personal observations, and bank records– in an attempt to uncover the discrepancy. This investigation made Sharma realize that, based on the supplies available, the amount of sales defendants had purported to make were simply not possible; he then suspected that defendants had inflated their sales on the income statements provided to him before closing. Further, employees who had been working for defendants revealed to Sharma that defendant Butt had, on numerous occasions, rung up high sales for food not ordered by customers, and then directed employees not to prepare the food that coincided with these orders. Moreover, Bank of America accounts revealed that deposits attributable to the restaurant were substantially lower than those represented in the statements given to Sharma.

In response to these findings, Sharma filed on action for fraud against the defendants, alleging they had inflated sales figures and lied during negotiations, resulting in fraudulent inducement to pay a higher price for the business than it was truly worth. He proposed that damages be calculated by either (1) multiplying weekly sales by 36, or (2) multiplying monthly earnings by 48, either of which meant to provide the proper valuation of the business.

Defendants filed a motion for summary judgment, claiming plaintiffs had failed to sufficiently establish the materiality of the alleged misrepresentations, their reliance on the misrepresentations, and their damages (i.e. three of the particular elements necessary to succeed on a fraud claim). The district court found that plaintiffs had adequately shown the materiality of and reliance on defendants’ misrepresentation, but had indeed failed to provide enough evidence for a factfinder to estimate with reasonable certainty the amount of damages they sustained. Namely, the court rejected the two methods proposed by plaintiff for finding the actual value of the two restaurants, concluding that neither method conformed to any generally accepted methods for valuing a business, nor sufficiently proved they were independently reliable. Thus, because damages are a necessary element of a fraud claim under controlling state law, the court granted summary judgment. On appeal, the sole issue presented regarded the district court’s finding of insufficient evidence of damages.

Elements of the Claim & Standards to be Met on Motion for Summary Judgment

On a motion for summary judgment, the court takes the record in the light most favorable to the non-movant party. The moving party is entitled to a grant of summary judgement as a matter of law if they show there is no genuine dispute as to any material fact. F.R.C.P. 56(a).

To establish a claim for fraud under Virginia law, a plaintiff must show: (1) false representation, (2) of a material fact, (3) made intentionally and knowingly, (4) with intent to mislead, (5) reliance by the party misled, and (6) resulting in damages to the party so misled. Evaluation Research Corp. v. Alequin, 439 S.E.2d 387, 390 (Va. 1994). Because all such elements are necessary, failure to satisfy any one element is enough to bar relief for a fraud claim, as the district court found in their ruling based on failure to establish damages.

Under Virginia law, when a dispute involves the transfer of goods or property, damages are measured by the difference between the asset’s actual value at the time of contract and the asset’s purported value if the representations made had instead been true. Courts have previously treated sales prices as sufficient evidence of value, especially in arms’ length transactions. Virginia law maintains that plaintiffs need not prove damages with absolute certainty, but a plaintiff still must provide sufficient evidence to allow a factfinder to make an intelligent, probable estimate of the damages or losses allegedly sustained.

Fourth Circuit Finds Plaintiffs’ Evidence Regarding Estimated Damages Sufficient to Survive Motion for Summary Judgement

The Court concluded that plaintiffs had indeed met their burden and had put forth sufficient evidence to allow an estimate of damages by a factfinder. Namely, the Court emphasized that the parties’ arms-length transaction would allow a reasonable factfinder to conclude that the restaurants’ final sales price represented their value, as needed for the calculation of damages. Viewing the record most favorably for the plaintiffs, the Court found that negotiations surrounding the final price of the restaurants evidenced that both parties’ relied on a valuation of the businesses derived from a multiple of weekly and/or monthly sales. Moreover, the entire content of negotiations between the parties clearly revolved around the restaurants’ weekly or monthly sales, from Sharma’s initial interest in purchasing the restaurant to the later financial statements used by defendants to further persuade Sharma to go forward with the purchase. The Court even performed its own calculations to affirm this result, despite the defendants’ refusal to confirm the calculation methods used to arrive at the sales price.

However, the Court also emphasized that the actual multiplier-numbers used or derived are not dispositive in this case, and that defendants could indeed challenge those numbers as a matter of fact later in the case. Instead, the true question was whether plaintiffs provided sufficient evidence, as a matter of law, for a factfinder to estimate a probable calculation of damages. In the Fourth Circuit’s opinion, the plaintiffs did just that by presenting their own estimate with reasonable precision and support for their own calculations, using an accepted approach based on income and computing their results with specific numbers provided by defendants to estimate the purchase price.

Vacated & Remanded

Based on their finding that Plaintiff’s purported estimates of damages were acceptable and sufficient to create a material dispute of fact, the Fourth Circuit vacated the District Court’s grant of summary judgement and remanded for further proceedings to continue plaintiff’s fraud claims.

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20Mar

Fourth Circuit Affirms Grant of Summary Judgment in Social Media Dispute

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By: Kristina Wilson

On Monday, March 20, 2017, the Fourth Circuit issued a published opinion in the civil case Grutzmacher v. Howard County. The Fourth Circuit affirmed the District Court for the District of Maryland’s grant of summary judgment in favor of the defendant, holding that the defendant’s termination of plaintiffs did not violate the plaintiffs’ First Amendment Free Speech rights. The plaintiff raises two arguments on appeal.

Facts and Procedural History

Prior to initiating this action, plaintiffs worked for the defendant, the Howard County, Maryland Department of Fire and Rescue Services. In 2011, the defendant started drafting a Social Media Policy (“the Policy”) in response to a volunteer firefighter’s inflammatory and racially discriminatory social media posts that attracted negative media attention. The Policy prevented employees from posting any statements that may be perceived as discriminatory, harassing, or defamatory or that would impugn the defendant’s credibility. Additionally, in 2012, the defendant promulgated a Code of Conduct (“the Code”) that prohibited disrespectful conduct toward authority figures or the chain of command established by the defendant. Finally, the Code required employees to conduct themselves in a manner that reflected favorably on the defendant.

On January 20, 2013, one of the plaintiffs advocated killing “liberals” on his Facebook page while on duty for defendant. The defendant asked the plaintiff to review the Policy and remove any postings that did not conform. Although the plaintiff maintained that he was in compliance with the Policy, he removed the January 20th posting. On January 23, 2013, the plaintiff posted a series of statements that accused the defendant of stifling his First Amendment rights. On February 17, 2013, the plaintiff also “liked” a Facebook post by a coworker was captioned “For you, chief” and displayed a photo of an obscene gesture. Shortly thereafter, the defendant served the plaintiff with charges of dismissal and afforded the plaintiff an opportunity for a preliminary hearing on March 8, 2013. On March 14, 2013, the defendant terminated the plaintiff.

At the district court, the plaintiff argued that the defendant fired him in retaliation for his use of his First Amendment Free Speech rights and that the Policy and Code were facially unconstitutional for restricting employees’ Free Speech. The district court granted the defendant’s motion for summary judgment regarding the retaliation claims, holding that the plaintiff’s January 20th posts and “likes” were capable of disrupting the defendant’s ability to perform its duties and thus did not constitute protected speech. Similarly, the January 23rd post and February 17th “like” were not protected speech because they did not implicate a matter of public concern. In June of 2015, the defendant revised its Policy and Code to eliminate all the challenged provisions. As a result, the district court dismissed the plaintiff’s facial challenge as moot.

The Plaintiff’s Free Speech Rights Did Not Outweigh the Defendant’s Interest

In evaluating the plaintiff’s First Amendment retaliation claim, the Fourth Circuit applied the Mcvey v. Stacy three-prong test. 157 F.3d 271 (4th Cir. 1998). Under Mcvey, a plaintiff must show the following three conditions: i) that he was a public employee speaking on a matter of public concern, ii) that his interest in speaking about a matter of public concern outweighed the government’s interest in providing effective and efficient services to the public, and iii) that such speech was a “substantial factor” in the plaintiff’s termination. Id. at 277–78.

The first prong is satisfied when a plaintiff demonstrates that his speech involved an issue of social, political, or other interest to a community. Urofsky v. Gilmore, 216 F.3d 401, 406 (4th Cir. 2000) (en banc). To determine whether the issue was social, political, or of interest to a community, courts examine the speech’s content, context, and form in view of the entire record. Id. The Fourth Circuit concluded that at least some of the content of plaintiff’s posts and “likes” were matters of public concern because the public has an interest in the opinions of public employees. Although not all of the postings were of public concern, the Fourth Circuit advocated examining the entirety of the speech in context and therefore proceeded to the second prong of the Mcvey analysis.

The Mcvey Factors Weighed More Heavily in Favor of the Defendant

The Fourth Circuit next balanced the plaintiff’s interest in speaking about matters of public concern with the government’s interest in providing efficient and effective public services. The Fourth Circuit used the Mcvey multifactor test to weigh the following considerations: whether a public employee’s speech (1) impaired the maintenance of discipline by supervisors; (2) impaired harmony among coworkers; (3) damaged close personal relationships; (4) impeded the performance of the public employee’s duties; (5) interfered with the operation of the institution; (6) undermined the mission of the institution; (7) was communicated to the public or to coworkers in private; (8) conflicted with the responsibilities of the employee within the institution; and (9) abused the authority and public accountability that the employee’s role entailed. McVey, 157 F.3d at 278.

The Fourth Circuit held that all of the factors weighed in favor of the defendant. The first factor was satisfied because plaintiff was a chief battalion, a leadership position, and allowing plaintiff to violate the Policy and Code without repercussions would encourage others to engage in similar violations. The second and third factors weighed in the defendant’s favor because several minority firefighters issued complaints and refused to work with the plaintiff after the posts. Similarly, the fourth factor weighed in the government’s favor because of the plaintiff’s responsibilities as a leader. The plaintiff’s leadership duties depended on his subordinates taking him seriously and looking to him as an example. By violating the policies he was supposed to uphold, the plaintiff failed to act as a leader and carry out his duties as chief battalion. Finally, plaintiff’s actions also “undermined community trust” by advocating violence against certain groups of people. Community trust and preventing violence are central to the defendant’s mission because the defendant’s function is to protect the community. Therefore, although plaintiff’s speech did involve some matters of public concern, the matters were not of sufficient gravity to outweigh all nine factors of the Mcvey multifactor test. Thus, the government’s interest in effectively providing public services outweighed the plaintiff’s interest in speech about public concerns.

The District Court’s Dismissal of the Facial Challenge on Mootness Grounds Was Proper

While defendant repealed all the challenged sections of the Policy and Code, a party’s voluntary repeal of provisions can only moot an action if the wrongful behavior can be reasonably expected not to recur. The Fourth Circuit affirmed the district court’s dismissal of the facial challenge for mootness because the current Fire Chief issued a sworn affidavit asserting that the defendant will not revert to the former Policy or Code. Additionally, the defendant’s counsel at oral argument declared that the defendant has no hint of an intent to return to the former guidelines. The Fourth Circuit held that these formal declarations were sufficient to meet the defendant’s mootness burden.

Conclusion

The Fourth Circuit affirmed both the district court’s grant of summary judgment and its grant of a motion to dismiss on mootness grounds.

 

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23Feb

Fourth Circuit Remands Deaf Prisoner’s Claims that Prison Failed to Accommodate

Categories: 4th Cir. Blog Criminal Cases
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By Mike Stephens

On Thursday, February 23, 2017, the Fourth Circuit issued a published opinion in Heyer v. U.S. Bureau of Prisons. Appellant, Thomas Heyer, brought several claims against the United States Bureau of Prisons (BOP) for failing to accommodate his deafness. After reviewing the district court’s grant of summary judgment in favor of BOP, the Fourth Circuit vacated and remanded the order.

Facts and Procedural History

After Heyer’s initial sentence expired, he remained in civil custody after being deemed “sexually dangerous to others.” He was born deaf and his native language is American Sign Language (ASL) . Given the dramatic differences between ASL and English, Heyer is unable to communicate effectively in English. Since his arrival at the prison, Heyer has repeatedly requested ASL interpreters. His inability to communicate with others has created several problems. Heyer is unable to communicate with the mental health officials responsible for determining the duration of his stay in prison. Heyer has suffered several strokes at the prison and has not been provided a way to communicate with medical personnel. He has also does not attend religious services and is unable to access goods sold because there are no translators. Additionally, Heyer has repeatedly been late or missed scheduled activities because he cannot hear announcements and does not have a vibrating watch or bed.

In 2011, Heyer filed suit against BOP asserting multiple violations of his First and Fifth Amendment rights. His Fifth Amendment claims were based on BOP’s failure to provide translators that would allow him to communicate with the medical and mental health professionals. Furthermore, the complaint alleged Heyer’s First Amendment rights had been violated by BOP’s refusal to provide a videophone and its failure to have translators present at the religious services. The district court granted summary judgment in favor of BOP.

Heyer’s Fifth Amendment Claims

Heyer alleges that BOP’s repeated failure to accommodate his deafness violates his Fifth Amendment rights because it rises to the level of “deliberate indifference.” While this standard is most often used in claims arising under the Eighth Amendment, the Fourth Circuit applied it to Heyer’s Fifth Amendment claims. The standard has two components: the plaintiff must show that he has serious medical needs, an objective standard, and that the defendant acted with deliberate indifference to those needs, a subjective standard. Heyer did not claim his deafness constituted a “serious medical need.” Rather, Heyer’s complaint alleged that BOP’s failure to provide interpreters for his interaction with medical professionals has resulted in inadequate treatment for his medical needs. BOP argued that because Heyer had suffered any actual injury, the standard had not been violated.

The Fourth Circuit agreed and held that Heyer had presented enough evidence to satisfy the deliberate indifference standard. The Court rejected the BOP’s argument, holding that BOP’s actions had exposed Heyer to a substantial risk of serious harm. The Fourth Circuit reasoned that Heyer’s continued seizures, coupled with his inability to communicate with the medical staff, was sufficient to satisfy the object prong.

The Fourth Circuit held that Heyer satisfied the subjective prong as well. BOP argued that Heyer presented no evidence showing BOP knew that the failure to provide translators created a serious risk to his health. Additionally, BOP argued that providing Heyer with assistance from other inmates constituted constitutionally adequate treatment. Again, the Fourth Circuit rejected BOP’s argument. Given BOP’s awareness of Heyer’s deafness, the Court reasoned that BOP was well aware that the failure to provide translators would create for ineffective medical treatment. This awareness, the Court reasoned, was sufficient for a factfinder to conclude the BOP was deliberately indifferent.

First Amendment Claims

Heyer’s alleged that the refusal to provide a videophone violated his First Amendment right to communicate with others outside of the prison. BOP countered that the refusal was merely an unwillingness to provide Heyer with his preferred method of communication. As such, BOP argued that it did not “impinge” on Heyer’s constitutional rights because Heyer could use the TTY devices at the prison.

The Fourth Circuit rejected BOP’s argument. TTY devices require the users to be proficient in English. Given that Heyer could not communicate in English, the Court reasoned that requiring Heyer to use TTY devices to communicate impinged on his First Amendment rights. The Court then proceeded to determine whether requiring Heyer to use the TTY devices was reasonably related to the penological interests of the prison. The Court applied the four factor test as required by Turner v. Safley. Ultimately, the Court found that the factors created issues of fact to be decided at trial. First, there was a factual dispute as to whether the TTY devices provided Heyer an effective means of communication. Second, a question of fact arose as to whether BOP would have to install new IT infrastructure to maintain prison safety. Lastly, the Court found a factual dispute as to whether there were alternative communicative devices available for use by Heyer. Ultimately, given the disputed facts, the Fourth Circuit found the district court erred in granting BOP’s motion for summary judgment. The Fourth Circuit also found a dispute of fact existed as to whether BOP had unreasonably restricted Heyer’s access to the TTY devices.

Lastly, Heyer alleged that the refusal to provide interpreters at the religious services violated his First Amendment rights. The district court dismissed these claims, finding that they were moot given BOP had provided interpreters to Heyer for other occasions. The BOP argued that a 2014 affidavit from the prison chaplain showed that BOP would provide an interpreter if necessary.

The Fourth Circuit also rejected this argument. The Court found that the affidavit was merely a “mid-litigation change of course” given the BOP had failed to provide an interpreter to Heyer for a religious service. The Court reasoned that an assurance to provide an interpreter in the future did not make Heyer’s claim moot.

Conclusion

The Fourth Circuit vacated the district court’s grant of summary judgment on Heyer’s First and Fifth Amendment claims. The case was remanded to the district court for further proceedings.

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31Oct

Fourth Circuit Upholds the Importance of the Family and Medical Leave Act (FMLA) by Affirming Dismissal of Fraudulent Claims

Categories: 4th Cir. Blog Civil Cases
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By Kelsey Hyde

On October 31, 2016, in the civil case of Masoud Sharif v. United Airlines, Inc., the Fourth Circuit affirmed the decision of the District Court for the Eastern District of Virginia dismissing plaintiff’s claims of unlawful retaliation by his employer. Because plaintiff failed to sufficiently rebut the defendant employer’s reasoning and factual support for their actions against him, the Fourth Circuit found the District Court had correctly granted defendant’s motion for summary judgment and dismissed plaintiff’s claims.

Sharif’s Claims and Subsequent Proceedings

On March 14, 2014, Masoud Sharif and his wife, both employees of United Airlines, Inc. at Dulles Airport in Washington, D.C., embarked on a planned vacation to South Africa. Their trip was scheduled to last until April 4, as a result of their successful bidding and receipt of approximately 20 days off, but, in the midst of those 20 days, Sharif was still assigned to work March 30 to 31 at customer service back in Washington, D.C.  Through the United Airlines “shift-swap” website, he was able to cover one day, but was still scheduled to work March 30.

However, back in 2009, Sharif had been diagnosed with an anxiety disorder, resulting in his qualifying for intermittent leave under the Family and Medical Leave Act (“FMLA”), 29 U.S.C. § 2601, et. seq. (2012), in order to handle his panic attacks. On the morning of March 30, the day of the shift he had unsuccessfully tried to cover, Sharif called from South Africa to take medical leave under the FMLA. Sharif had not made any prior reservations for a return flight to the U.S., but did fly to Italy with his wife the next day, and did eventually depart for Washington on April 3, arriving back just in time for his wife’s shift.

The circumstances of Sharif’s FMLA leave, coincidentally falling on the only day he was scheduled to work in the midst of planned time-off, did not go unnoticed. Instead, this incident, along with another prior instance in September 2013 where Sharif took FMLA leave under similar circumstances, inspired an investigation. Sharif was interviewed by a member of Human Resources and gave a series of inconsistent answers regarding his “unsuccessful efforts” to return home in time for his shift. As a result, senior management was notified that Sharif was untruthful in his answers, and changed his story many times, which, ultimately, led to the conclusion that he never intended to make it back in time to work his shift. Other evidence in employment and travel records also corroborated this conclusion. After being suspended without pay, Sharif was notified that United Airlines planned to terminate him for fraudulently taking FMLA leave and for making dishonest representations during the subsequent investigation. Sharif retired under threat of termination in June 2014.

Challenging Employer Action as Retaliation in Violation of FMLA

            The FMLA includes both a prescriptive element, guaranteeing substantive rights to employees who qualify, and a proscriptive limitation on employers, which makes it unlawful for employers to discharge employees for opposing employment practices that are unlawful under the FMLA. 29 U.S.C. §§ 2615(a)(1), 2615(a)(2). The proscriptive limitation effectively provides plaintiff employees with an avenue to legally dispute retaliation by their employers.

The Fourth Circuit reviewed relevant Supreme Court and Circuit Court decisions to navigate the standards of law and burdens of proof applicable in this case. To succeed on retaliation claims, a plaintiff must show that (1) they engaged in protected activity, (2) the employer took adverse action against them, and (3) this adverse action was casually connected to the protected activity. Yashenko v. Harrah’s NC Casino Co., LLC, 446 F.3d 541, 551 (4th Cir. 2006) (citing Cline v. Wal-Mart, 144 F.3d 294, 301 (4th Cir. 1998)). Thus, employer intent is especially relevant to such claims, and plaintiff can establish such intent by either direct evidence, or under the “burden-shifting framework” introduced by the Supreme Court in McDonnell Douglas Corp. v. Green. 411 U.S. 792, 800-06 (1973).

This burden-shifting framework entails: (a) plaintiff establishing a prima facie case of retaliation; (b) if successful, the burden shifts to the employer to provide some legitimate, non-discriminatory reason for the adverse action to rebut plaintiff’s prima facie case; (c) if successful, the burden shifts back to plaintiff to persuade fact-finders that employer’s explanation in (b) was a “pretext” for discrimination. Id. at 802-04. This third element requires plaintiff to produce sufficient evidence such that a reasonable fact-finder could conclude the employer’s reasons were impermissible.

In addition to these standards specific to the FMLA and retaliation claims, the summary judgment standard further requires that a reasonable jury could find for the non-moving party, in this case Sharif. See Fed. R. Civ. P. 56(a) (2016).

Legal Contentions on Appeal

Sharif filed suit against United Airlines for retaliation in violation of the proscriptive provision of FMLA, arguing they threatened to terminate him for taking FMLA leave and that their proffered reasons were a mere pretext for this discriminatory act. The District Court found that Sharif failed to create an issue of triable fact regarding United Airline’s explanation for his threatened discharge as allegedly pretextual, and awarded summary judgment to the defendant employer, dismissing Sharif’s claims. On appeal, Sharif contends that he has produced sufficient evidence of pretext to survive summary judgment.

Plaintiff’s Failed to Create a Triable Issue of Fact 

            Ultimately, the Fourth Circuit was unpersuaded by plaintiff’s argument that United Airlines’ actions were a pretext for impermissible discriminatory conduct under the FMLA. The Court considered the evidence as a whole, in a light most favorable to the plaintiff, yet could not find any cause for dispute over the logic and reasoning of United Airline’s conclusion. On the contrary, they found all evidence supported the nondiscriminatory motivations for their action against Sharif, based on the facts available from Sharif’s employment records, his noted FMLA leave, and the results of the subsequent investigation. Additionally, the Court found that Sharif’s inconsistent narrative throughout the investigation, as well as his failure to provide any documentation or verification of his own version of the events, did not effectively dispute the evidence proffered by United Airlines, or offer any alternative, such that a fact-finder could reasonably rule in favor of him. Thus, he failed to meet his burden to provide sufficient evidence and create a genuine dispute of material fact regarding his employer’s motives as pretext.

Affirming Dismissal and Defending the Purpose of the FMLA

            Based on their analysis of the case under applicable Supreme Court and Fourth Circuit precedent, the Fourth Circuit affirmed the dismissal of plaintiff’s claims. In doing so, the court also highlighted the fundamental importance of the FMLA, allowing employees to take leave for legitimate family needs and medical reasons without threatening job security, and emphasized that fraudulent invocations and dishonest representations for claims under the FMLA greatly compromise this Congressional goal. As such, their decision reflected the importance in providing employers the ability to sanction employees who threaten to abuse this statute and undermine its purpose.

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7Oct

Fourth Circuit Clarifies Definition of “Debt Collectors,” Affirms Dismissal of Truth in Lending Act Claims

Categories: 4th Cir. Blog Civil Cases
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By Mike Stephens

This afternoon, October 7, 2016, the Fourth Circuit issued a published opinion in the civil case McCray v. Federal Home Loan Mortgage Corp. The Fourth Circuit affirmed the district court’s decision to dismiss the Plaintiff’s Truth in Lending Act (“TILA”) claims regarding notice. However, the Fourth Circuit reversed and remanded the district court’s decision that two of the defendants, the White Firm and the “Substitute Trustees,” were not “debt collectors” under the Fair Debt Collection Practices Act (“FDCPA”).

Facts and Procedural History

In October 2005, Renee McCray took out a loan to refinance her house. The loan documents were sold to the Federal Home Loan Mortgage Corporation (“Freddie Mac”). Wells Fargo was retained to service the loan. After several years of payments, McCray disputed a billing statement in June 2011 and sent Wells Fargo several requests for information regarding the costs contained within the statement. Wells Fargo either failed to respond or did not respond adequately to McCray’s requests. Eventually, McCray stopped making payments after April 2012 and the loan went into default. Wells Fargo employed the White Firm to initiate the foreclosure.

The White Firm sent McCray a letter dated September 28, 2012, notifying McCray that the firm had been retained to begin the foreclosure proceedings on her home. The letter ended by stating, “This is an attempt to collect a debt. This is a communication from a debt collector. Any information obtained will be used for that purpose.” The White Firm also sent McCray another letter notifying her that the loan was “154 days past due” and that $4,282.91 was needed to cure the default. Members of the White Firm were placed as trustees on the deed of trust and filed a foreclosure action in February 2013, which is still pending. McCray filed suit in 2013, alleging violations of FDCPA and TILA. The district court dismissed four of McCray’s claims and granted summary judgment on the fifth. McCray raised three issues on appeal.

Defendants Were Debt Collectors Subject to the FDCPA’s Regulation

McCray first alleged that the the district court erred in concluding the White Firm and the Substitute Trustees were not “debt collectors” as defined within the FDCPA. McCray argued that the facts contained within the complaint regarding the firm’s letter were sufficient to show that the White Firm “regularly collect[ed] or attempt[ed] to collect debts” that were owed to another, consistent with the definition in 15 U.S.C. § 1692a(6). The White Firm responded that their actions did not qualify them as debt collectors as they never actually sought collection of money because, as the district court concluded, there was no “express demand for payment or specific information about [McCray’s] debt.” The White Firm also argued that their foreclosure action was “incidental to [their] fiduciary obligation,” placing them within an exception in § 1692a(6)(F)(i).

The Fourth Circuit reversed and remanded the district court’s dismissal, holding that McCray’s complaint sufficiently alleged that the White Firm were debt collectors and that their actions in initiating the foreclosure constituted debt collection activity for the purposes of the FDCPA. The Court rejected the White Firm’s argument for two reasons. First, the Court held that the FDCPA did not require an “express demand for payment.” Instead, activities “taken in connection with the collection of a debt or in an attempt to collect a debt” are actionable under the FDCPA. Second, the Court held that foreclosure is not merely “incidental,” but instead “central to the trustee’s fiduciary obligation under the deed of trust.” Thus, because McCray’s complaint alleged facts showing the White Firm was retained to collect the loan in default, and because the firm’s letter concluded that it was “an attempt to collect debt,” their actions fell within debt collection activity that is regulated by the FDCPA.

The District Court Properly Dismissed McCray’s TILA Claim

McCray also alleged that the district court wrongfully dismissed her TILA claim against Freddie Mac. McCray argued that Freddie Mac failed to give her notice of its purchase of the loan in violation of § 1641(g). This provision was added by Congress in 2009, which provides that:

not later than 30 days after the date on which a mortgage loan is sold or otherwise transferred or assigned to a third party, the creditor that is the new owner or assignee of the debt shall notify the borrower in writing of such transfer.

The district court found that McCray’s complaint failed to allege that Freddie Mac acquired the loan after Congress amended TILA to require notice. Additionally the district court found that McCray received notice of her claim in October 2011 because Wells Fargo sent her a letter notifying her that Freddie Mac was the “investor” on the loan. Because McCray filed suit in 2013 after receiving notice of the TILA claim in October 2011, the district court held, in the alternative, that her claim was barred by TILA’s one-year limitations period.

The Court affirmed the district court’s initial conclusion because McCray did not challenge the district court’s dismissal for failure to allege that her loan was sold after Congress amended TILA in 2009.  The Court affirmed the district court’s alternative holding as well. McCray did challenge the district court’s alternative conclusion, alleging hat the district court erred by not allowing her the opportunity to amend her complaint.  McCray pointed out that the October 2011 letter was not included in her complaint and instead was contained within the defendants’ motion to dismiss. Yet, McCray submitted an affidavit in her response where she stated she received a letter in December 2011 which repeated that “[t]he investor/noteholder for this loan is [Freddie Mac].” The Court found McCray’s claim was barred by the statute of limitations because McCray conceded notice that Freddie Mac was the owner of the loan in December 2011.

Wells Fargo Did Not Hold Legal Title

Lastly, McCray argued the district court wrongfully dismissed her claim that Wells Fargo violated § 1641(g) when it failed to give her notice that it had been assigned the deed of trust. The district court concluded that § 1641(g) was not applicable because Wells Fargo only received a “beneficial interest” to service the loan and “not legal title.” McCray claimed that a line in the deed of trust granted Wells Fargo an ownership interest and that failure to notify her of this interest was in violated of TILA.

The Fourth Circuit affirmed the district court, holding that the Wells Fargo did not obtain an ownership interest because the note was not sold to Wells Fargo. The Court found that simply because the note “can be sold” does not mean “the note was in fact sold to Wells Fargo.” The Court also highlighted that this claim contradicted McCray’s previous claim that Freddie Mac owned the note and failed to provide timely notice of ownership.

Disposition

The Court ultimately reversed and remanded McCray’s FDCPA claim that the White Firm and the Substitute Trustees were acting as “debt collectors.” The Court was careful to note that this reversal was not to indicate whether or not the defendants actually violated the FDCPA. The Court affirmed the district court’s dismissal of McCray’s TILA claims.

Judge Johnston Concurring in Part and Dissenting in Part

Judge Johnston, District Judge for the Southern District of West Virginia, sitting by designation, only dissented on the portion of the decision to affirm dismissal of McCray’s TILA claim against Wells Fargo for failing to provide notice of its interest in the loan. Judge Johnston noted that McCray’s complaint was filed pro se, and as such, should have been construed liberally. Because of this, the complaint could be read to infer that McCray could not identify the actual owner of the mortgage loan. In essence, the TILA claim regarding notice was nothing more than a pro se litigant attempting to “cast a wide net” by alleging both Wells Fargo and Freddie Mac failed to provide her notice of which entity owned the loan. Judge Johnston found the majority opinion’s reading of a pro se complaint to be “unduly strict” at the pleading stage when discovery would surely reveal whether Wells Fargo did receive an ownership interest.

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8Apr

Fourth Circuit Applies Davis Deliberate Indifference Standard to § 504 Student-on-Student Harassment Claims

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By Sarah Saint

On April 8, 2016, the Fourth Circuit released its published opinion in the civil case of S.B. v. Board of Education of Harford. S.B., a student with disabilities who attend Aberdeen High School in Harford County, Maryland, by and through his mother, A.L., sued the Harford County Board of Education (the “Board”), alleging that the Board violated § 504 of the Rehabilitation Act by allowing other students to bully and harass S.B. because of his disability. S.B.’s stepfather, T.L., who is a teacher and athletic director at Aberdeen High School, sued in his own right, alleging that the Board violated § 504 by retaliating against him for advocating for S.B. The Fourth Circuit affirmed the district court’s grant of summary judgment to the Board, ruling that neither S.B. nor T.L. provided evidence for their claims.

Facts Presented in the Light Most Favorable to S.B. and T.L.

S.B.’s disabilities included Attention Deficit Hyperactivity Disorder, weak visual-spatial ability, and a nonverbal learning disability. During high school, S.B.’s classmates severely bullied him, insulting him with homophobic slurs, sexually harassing him, physically threatening him, and calling him racist names. S.B.’s parents reported these incidents to the school, which investigated each incident. The school regularly disciplined the offenders and assigned a paraeducator to follow S.B. during school to monitor his safety. Nevertheless, this was not to A.L. and T.L.’s liking, and S.B.’s parents eventually began publicly criticizing the school’s efforts to protect S.B in November 2012.

Around the same time, the school denied T.L. the opportunity to complete a practicum for his master’s degree program at Aberdeen High School. Then, in the spring 2013, the school did not give T.L. tickets to a scholarship banquet for student-athletes and informed him that he would not be teaching the summer physical education classes that year, though he had taught it the previous years.

In April 2013, A.L. and T.L. filed the original complaint. In October 2013, T.L. raised concerns at a parents’ forum about the lack of harassment reporting forms available at the high school.

Despite the bullying, S.B. graduated Aberdeen High School on time in June 2014. He consistently achieved passing grades throughout high school and began taking classes at Harford Community College after graduation.

Procedural History

In June 2013, S.B. and his parents amended their complaints to allege violations of § 504 of the Rehabilitation Act, 29 U.S.C. § 701 et seq.; Title II of the Americans with Disabilities Act (“ADA”), 42 U.S.C. § 12101 et seq.; and 42 U.S.C. §§ 1983 and 1985. The claims were premised on the fact that the defendants had discriminated against S.B. on his disability by failing to prevent student-on-student bullying and harassment and had retaliated against S.B.’s parents when they advocated for S.B.

In September 2013, the district court dismissed all the individual defendants and S.B.’s claims under §§ 1983 and 1985. A.L. also voluntarily dismissed her retaliation claim. Before the district court at trial and before the Fourth Circuit on appeal were S.B.’s claim of disability-based discrimination in violation of § 504 and the ADA and T.L.’s claim of retaliation under § 504.

After substantial discovery, in April 2015, the district court granted summary judgment to the Board because there was not evidence to support S.B.’s and T.L.’s claims. For one, there was no evidence in the record that the Board had acted with bad faith, gross misjudgment or deliberate indifference in responding to the harassment. Additionally, there was no evidence of a causal link between T.L. advocating for S.B. and any action taken by the Board.

Standard of Review

The Fourth Circuit reviewed the district court’s decision de novo. Summary judgment is proper when there is no genuine dispute to any material fact and the movant is entitled to a judgment as a matter of law. Fact are viewed and inferences are drawn in the light most favorable to the non-moving party, here S.B. and T.L. If no reasonably jury could find for the non-moving party, the appellate court will affirm a grant for a motion for summary judgment.

Fourth Circuit Adopted Davis Standard of Deliberate Indifference for § 504 Claims

Section 504 provides that “[n]o otherwise qualified individual with a disability . . . shall, solely by reason of her or his disability, be excluded from the participation in, be denied the benefits of, or be subjected to discrimination under any program or activity receiving Federal financial assistance.” 29 U.S.C. § 794(a). S.B. claimed that he was subjected to years of sustained and pervasive student-on-student harassment and bullying based on his disability. By the Board failing to prevent the harassment, S.B. alleged that the Board engaged in disability-based discrimination prohibited by § 504.

In Davis v. Monroe County Board of Education, 526 U.S. 629 (1999), the Supreme Court addressed a similar claim under Title IX, which provides for similar protections as § 504 but for gender instead of disability. The Court held in Davis that a school could only be liable for student-on-student harassment when it was “deliberately indifferent” to known acts of such harassment. A negligent failure to learn of or react to student-on-student harassment does not subject a school to liability–only “deliberate indifference to known acts of harassment.” Id. at 642–43.

The Fourth Circuit, in alignment with most other federal courts who have reached this issue, decided that the same reasoning the Davis Court applied to Title IX also applies to § 504 claims arising from student-on-student harassment or bullying because of the statutory parallels. Schools must be on notice of the student-on-student harassment and act with deliberate indifference in order to be held liable for it.

The Fourth Circuit rejected S.B.’s argument that the Fourth Circuit had already adopted a different standard for § 504 liability in 1998: that a school can be liable if the school acted with bad faith or gross misjudgment. The 1998 case that S.B. cited in support of this theory–Sellers v. School Board of City of Manassas, 141 F.3d 524 (4th Cir. 1998)–did not involve school liability for student-on-student misconduct but a school’s own direct conduct. When a school allegedly violates § 504 through it’s own conduct, such as failing to provide a free appropriate public education, the bad faith or gross misjudgment standard applies. However, Sellers said nothing about school liability for student-on-student harassment. Accordingly, the Fourth Circuit found that it is guided by Davis and not Sellers.

S.B.’s Claim of Disability Discrimination in Violation of § 504

To succeed on a § 504 student-on-student harassment claim, a plaintiff must show that he was an individual with a disability; that he was harassed by other students because of his disability; that the disability-based harassment was sufficiently severe, pervasive, and objective offensive that it effectively deprived him of access to educational benefits and opportunities at school; and that the school knew about the disability-based student-on-student harassment and was deliberately indifferent to it.

The Fourth Circuit agreed with the district court that S.B. could not establish that the student-on-student harassment was based on his disability. It was more likely that S.B. was bullied because of his race, which is not actionable conduct under § 504. Further, the Fourth Circuit agreed with the district court that S.B. and his parents never informed the Board that he was being bullied because of his disability, only that he was being bullied. S.B. alleged that the school should have known that the harassment was based on his disability, but the Supreme Court expressly rejected such a standard in Davis.

Finally, the Fourth Circuit agreed with the district court that the Board was not deliberately indifferent under Davis, which is a high standard that requires an official decision by the school no to remedy the student-on-student harassment. The response to the harassment must be clearly unreasonable in light of the known circumstances. Because the school investigated every single incident of harassment of which it was informed, disciplined the offenders, and assigned a paraeducator to accompany S.B., the school acted reasonably. School administrators are entitled to substantial deference when they execute a disciplinary response to student-on-student bullying or harassment, so requests from parents for stronger discipline is not enough to make the school’s chosen actions clearly unreasonable. The Fourth Circuit decided that no reasonable juror could find that the school was less than fully responsive to S.B.’s situation.

T.L.’s Claim of Retaliation in Violation of § 504

Because there was no direct evidence of retaliation, T.L. had to use the McDonnell Douglas Corp. v. Green, 411 U.S. 792, 802 (1973), burden-shifting framework to make a prima facie case of retaliation by showing (1) that he engaged in protected activity, (2) that the Board took an adverse action against him, and (3) that the adverse action was causally connected to his protected activity. The Board did not dispute that T.L. engaged in a protected activity, advocating for S.B., a student with disabilities. The Fourth Circuit found that the Board’s decision not to rehire T.L. to teach the summer physical education class was a materially adverse action. Nevertheless, the Fourth Circuit agreed with the district court that no reasonable jury could find the necessary causal connection between the Board’s adverse action and T.L.’s protected activity. The Board proffered the legitimate, non-retaliatory reason for its decision that they needed one male and one female physical education teacher for the summer, and that another male had more experience than T.L. T.L. attempted to rely on the temporal proximity between the reassignment and the protected activity to show the causal connection, but timing alone cannot defeat summary judgment once an employer offered a legitimate, non-retaliatory reason.

Conclusion

Because the Fourth Circuit agreed with the district court that no reasonable juror could find that the school was deliberately indifferent to the student-on-student harassment of S.B. and no reasonable juror could find that there was a causal connection between T.L.’s protected activity and the adverse action against him, the Fourth Circuit affirmed the judgment of the district court granting the Board’s motion for summary judgment.

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