Wake Forest Law Review
13Mar

Fourth Circuit Holds That Arbitrators Have Opportunity to Resolve Liability and Damage Disputes Before Moving to Federal Court

Categories: 4th Cir. Blog Civil Cases
Comments Off on Fourth Circuit Holds That Arbitrators Have Opportunity to Resolve Liability and Damage Disputes Before Moving to Federal Court

mining

By Daniel Stratton

On March 8, 2016, the  Fourth Circuit issued a published opinion in the civil case Peabody Holding Company, LLC v. United Mine Workers of America, vacating the district court’s decision. The Fourth Circuit held that under the complete arbitration rule, an arbitrator handling a labor dispute between Peabody Holding and United Mine Workers of America should have been allowed to finish resolving both the liability and remedial phases of the dispute before the matter was moved to federal court.

United Mine Workers and Peabody Coal Company Enter into Job Opportunity Agreement

In 2007, the United Mine Workers of America and Peabody Coal company entered into a Memorandum of Understanding Regarding  Job Opportunities (“Jobs MOU”). Peabody Coal signed the agreement on behalf of itself and its parent company, Peabody Holding. The purpose of the Jobs MOU was to require non-unionized companies within the Peabody corporation to give preference to coal miners who either worked for or were laid off by Peabody Coal with regards to hiring treatment. The Jobs MOU included an arbitration clause that required all disputes involving the MOU to be submitted to an arbitrator, whose decisions would be final and binding.

That same year, Peabody Energy Corp., the ultimate corporate parent of Peabody Holding,  Peabody Coal, and another company, Black Beauty Coal Company, began a process to spinoff part of its mining operation into a new entity known as Patriot Coal Corporation. Peabody Coal was spun off into Patriot. All of the Peabody subsidiaries that became part of Patriot had been signatories to the Jobs MOU. The only subsidiary that had been a signer to the Jobs MOU that was not spun off into Patriot was Black Beauty. At the completion of the spinoff, Peabody Coal had no corporate relationship with Peabody Holding or Black Beauty.

In 2008, Black Beauty hired United Minerals Company to assist with mining operations on Black Beauty’s property. Both United Minerals Company and Black Beauty were non-unionized. Shortly after United Minerals Company began working with Black Beauty, the United Mine Workers of America sent a letter to Peabody Energy and Peabody Holding explaining that Peabody Holding and Black beauty were still bound by the Jobs MOU. Peabody disagreed, arguing that after Peabody Coal had been spun off, the rest of the Peabody corporate family no longer had any obligation under the Jobs MOU.

Peabody initially argued that this dispute with United Mine Workers was not arbitrable, an argument that the Fourth Circuit rejected in 2012. After being sent back to arbitration, the union and Peabody agreed to bifurcate the dispute into separate liability and remedy phases. The arbitrator ruled that the Jobs MOU remained in effect despite the fact that Peabody Coal had no corporate relationship with Peabody Holding. The arbitrator declined to rule on whether or not Black Beauty was actually exempt from the Jobs MOU, deferring its decision on that question until the remedy stage.

Peabody and United Mine Workers Take Their Dispute to the Courts

Peabody sought to vacate the arbitrator’s decision, filing an declaratory judgment action in the U.S. District Court for the Eastern District of Virginia. At the same time, the United Mine Workers filed a counterclaim to enforce the decision by the arbitrator.  Under Section 301 of the Labor Management Relations Act (“LMRA”), some courts viewed their jurisdiction as being limited to “review of final arbitration awards,” while others believed that Section 301 provided “sweeping jurisdiction.” The district court ultimately declined to weigh in on that debate, instead noting that because the liability portion of the arbitration was finished, it was final and therefore reviewable. The district court found in favor of the union, holding that the arbitrator was right to find the Jobs MOU still valid. Peabody and its subsidiaries appealed the district court’s decision. After the parties briefed the appeal, the Fourth Circuit asked for additional briefing on whether the arbitrator’s decision was even properly before the circuit, because the arbitration was not yet complete.

The Limits and Scope of the Complete Arbitration Rule

Under Section 301 of LMRA, federal district courts have jurisdiction over suits involving contract violations between employers and unions. The Supreme Court has long held that Section 301 can be used to seek enforcement of an arbitration award made under a collective bargaining agreement’s arbitration clause. As a threshold matter however, a court must determine that the award is final and binding. Many courts have held this to mean that an arbitrator must have ruled on both liability and remedies before the decision can be reviewable.

Some judicial decision viewed the complete arbitration rule as a restriction on federal jurisdiction. Other decisions had focused on Section 301’s broad language, and have viewed the complete arbitration rule to be “only a prudential limitation on judicial involvement” in an arbitrated labor dispute.

The Fourth Circuit Finds that the Arbitration Decision was sent to the Courts Too Soon

The Fourth Circuit noted that several courts which view the complete arbitration rule in jurisdictional terms still concede that there are exceptions to the rule in extreme cases. Based on this, the Fourth Circuit noted that this necessarily meant that the complete arbitration rule only constituted a prudential limitation. The Court also noted many policy rationales for the complete arbitration rule were the same as those used for strictly jurisdictional relatives. Like the rules that require a district court to enter a final judgment or order before an appellate court can review the case, the complete arbitration rule promotes the same goals of preventing “piecemeal litigation and repeated appeals.” Applying the complete arbitration rule also helps prevent a party from using courts to delay the arbitration, the Fourth Circuit noted.

In terms of actually applying the complete arbitration rule, the Fourth Circuit noted that the application was straightforward. Generally, when an arbitrator decides liability and “reserves jurisdiction to decide remedial questions” later, a federal court should wait to review until all questions have been resolved.  The Court was unpersuaded by Peabody’s arguments that the liability phase was final and thus reviewable. The Fourth Circuit noted that such a division was sensible and common. Just because the parties decided to split their dispute did not change the fact that they agreed to submit the entire dispute to the arbitrator.

The Fourth Circuit also quickly dismissed Peabody’s arguments that reviewing the liability portion now would promote efficiency. Such efficiency arguments could potentially be applied to virtually any case, the court noted, before explaining that by waiting until after the remedy portion was resolved the court was actually promoting efficiency. This was because the parties could still reach a settlement at some point, making a review of the liability portion moot. The Fourth Circuit concluded by explaining that arbitration is a matter of contract, and as such the parties should be able to design an arbitral process that best suits the needs of the parties.

The Fourth Circuit Remands the Case Back to the Arbitrator

The Fourth Circuit ultimately held that the arbitrator’s decision had been prematurely sent to the courts, and remanded the case back to the district court to remand the case back to the arbitrator to continue the arbitration.

Tags:
11Mar

Fourth Circuit Holds that Union’s Conduct did not Affect Plaintiffs Ability to Exhaust Contractual Remedies Under Collective Bargaining Agreement

Categories: 4th Cir. Blog Civil Cases
Comments Off on Fourth Circuit Holds that Union’s Conduct did not Affect Plaintiffs Ability to Exhaust Contractual Remedies Under Collective Bargaining Agreement

By Whitney Pakalka

On March 10, 2016, the Fourth Circuit issued its published opinion in the civil case, Groves v. Communication Workers of America. Plaintiffs, employees who were terminated by AT&T based on what were later discovered to be flawed reports, filed suit against AT&T and their union under Section 301 of the Labor Management Relations Act. The district court granted the Union’s motion for summary judgment, holding that Plaintiffs had not shown that the Union’s conduct prevented Plaintiffs from exhausting their contractual claims against AT&T under the collective bargaining agreement. The Fourth Circuit affirmed, holding that a hybrid § 301 suit cannot be used to challenge union conduct that, although obstructive, did not contribute to an employee’s failure to exhaust her contractual remedies for the employer’s conduct.

Plaintiffs’ Termination and the Union’s Handling of a Subsequent Settlement Offer

Rebecca Groves and Jonathan Hadden, Plaintiffs, were hired as retail sales consultants for AT&T in Anderson, South Carolina in December 2008. Both Plaintiffs joined the union, Communications Workers of America (“CWA”) and Local 3702 (collectively the “Union”). The Union entered into a collective bargaining agreement with AT&T, under which a formal grievance for an employee’s wrongful discharge or discipline must be submitted by the Union to AT&T in writing within forty-five days of the action complained of. Failure to follow the prescribed grievance procedure results in waiver of the formal grievance by the employee and the Union.

Groves and Hadden were fired in May and June 2012, respectively, but neither of them contacted the Union or filed a grievance. In August 2012, Steve Frost, executive director of labor relations at AT&T, contacted CWA’s administrative director, Betty Witte, to explain that AT&T discovered that reports that led to the termination of sixteen employees, including Plaintiffs, were flawed. Frost asked Witte to contact the terminated employees and offer a settlement of either $2,500 and reinstatement, or $5,000 without reinstatement. Witte then contacted Gerald Souder, a staff representative for CWA, who contacted Les Powell, president of Local 3702, asking him to contact Plaintiffs. Although Local 3702 had Plaintiffs’ contact information on file, Plaintiffs were not contacted because they had not filed grievances or contacted the Union.

Groves and Hadden later learned of the settlement offers, and contacted Souder, who informed them that only the $5,000 offer without reinstatement remained available and they could not file a grievance because the forty-five day limit in the collective bargaining agreement had passed. Plaintiffs filed suit against AT&T and the Union in the District Court for the District of South Carolina, alleging that AT&T breached the collective bargaining agreement between itself and the Union, and that the Union breached its duty of fair representation by failing to inform Plaintiffs of the settlement offers. Plaintiffs and AT&T reached a settlement, and Plaintiffs were reinstated to their former positions in March 2013. The district court granted the Union’s motion for summary judgment, finding that Plaintiffs had not established the threshold requirement for a § 301 action, which requires that the Union’s breach of duty prevent Plaintiffs from exhausting their claims under the collective bargaining agreement

Actions Under Section 301 of the Labor Management Relations Act 

Section 301 of the Labor Management Relations Act allows “[s]uits for violation of contracts between an employer and a labor organization,” but usually requires that an employee first exhaust contractual remedies in that agreement. However in a “hybrid § 301” action, an employee may file suit without exhausting all contractual remedies by showing that the union breached its duty of fair representation and that her employer violated the collective bargaining agreement. Thompson v. Aluminum Co. of Am., 276 F.3d 651, 656 (4th Cir. 2002). A union breaches its duty of fair representation if its actions are arbitrary, discriminatory, or in bad faith. Air Line Pilots Ass’n, Int’l v. O’Neill, 499 U.S. 65, 67 (1991).

Hybrid § 301 actions exist in order to avoid “unacceptable injustice” that would occur if an employee had to exhaust all contractual remedies even when the union representing her in the grievance procedure acted in such a way as to breach its duty of fair representation. The Supreme Court has held that the hybrid § 301 action is appropriate when an employee cannot exhaust contractual remedies because “the union has sole power under the contract to invoke . . . the grievance procedure” and the employee “has been prevented from exhausting his contractual remedies by the union’s wrongful refusal to process the grievance.” Vaca v. Sipes, 386 U.S. 171, 185 (1967).

Fourth Circuit Holds that a Union’s Breach of Duty Must Inhibit Employee’s Ability to Exhaust Contractual Remedies

The Fourth Circuit reasoned that requiring a causal nexus between a union’s breach of its duty of fair representation and the plaintiff’s failure to exhaust her contractual remedies was consistent with other circuits and the Supreme Court’s articulation of the hybrid § 301 claim’s purpose. The court reasoned that it was “a safeguard for wronged employees whose unions fail to assert [their] rights,” and that to allow a hybrid § 301 claim where the union did not impact the employee’s ability to pursue contractual remedies would convert it into “a tool to bypass the normal exhaustion rule . . . any time employees also have some unrelated claim against their union.”

The Court noted that Plaintiffs did not allege that the Union’s conduct had prevented them from filing a grievance under the collective bargaining agreement, and that because they did not file a grievance with the Union, the Union did not know they were terminated until after the contractual period for filing a grievance had passed. Although the Fourth Circuit described the Union’s conduct as “irresponsible at best, and certainly prevented Plaintiffs’ from accepting AT&T’s original reinstatement offer,” the court found that Plaintiffs had waived their right to grieve and were thus not entitled to that offer. The court found that because the Union’s conduct “had nothing to do with their failure to vindicate their rights through the contractually designated procedure,” allowing Plaintiffs to bypass the usual requirements of § 301 would be inappropriate, and accordingly affirmed the district court’s grant of summary judgment.

The Fourth Circuit did not foreclose the possibility that an employee could bring a hybrid § 301 claim without first attempting to file a grievance, noting that where an employee’s failure to invoke the grievance process was caused by the union’s breach of duty, a hybrid § 301 claim “might well be viable.” Additionally, the court noted that its holding did not leave Plaintiffs without a remedy, because they could have brought a stand-along claim against the Union for breach of its duty of fair representation.

Fourth Circuit Affirmed the Grant of Summary Judgment in Favor of the Union

The Court found that Plaintiffs’ failure to file a grievance was not caused by the Union’s failure to contact them about a settlement offer made by AT&T after the company discovered that it had terminated Plaintiffs based on flawed reports. Accordingly, the Fourth Circuit affirmed the grant of summary judgment in favor of Defendant-Union because any breach of the Union’s duty of fair representation did not contribute to Plaintiffs’ failure to exhaust their contractual remedies under the collective bargaining agreement.

Tags:
11Feb

Fourth Circuit Holds that Creditors in Maryland “Discover” Violations of Closed End Credit Provisions When They Actually Become Aware of Charging an Improper Interest Rate

Categories: 4th Cir. Blog Uncategorized
Comments Off on Fourth Circuit Holds that Creditors in Maryland “Discover” Violations of Closed End Credit Provisions When They Actually Become Aware of Charging an Improper Interest Rate

 By Whitney Pakalka

On January 11, 2016, the Fourth Circuit issued a published opinion in the civil case of Askew v. Hampton Roads Finance Company. The District Court for the District of Maryland granted Hampton Roads Finance Company (“HRFC”) summary judgment on all of Dante Askew’s borrower-creditor claims. The Fourth Circuit affirmed the grant of summary judgment as to Askew’s claims that HRFC violated the Maryland Credit Grantor Closed End Credit Provisions (“CLEC”) and was in breach of contract for failing to properly notify him that the interest rate exceeded the statutory maximum within sixty days of when it “should have” known of the error. However, the Court found that genuine issues of material fact existed as to Askew’s claim that HRFC violated the Maryland Consumer Debt Collection Act (“MCDCA”), and reversed and remanded the district court’s grant of summary judgment as to that claim.

The Used Car Contract and Dispute Between Askew and HRFC

 In 2008, Askew entered into a contract with a car dealership for financing to purchase a used car. The dealership assigned the contract to HRFC, which discovered in August 2010 that the contract’s interest rate of 26.99% exceeded CLEC’s maximum allowable rate of 24%. The next month, HRFC sent Askew a letter informing him that the interest rate was “not correct” and credited his account $845.40. However, the letter did not specify the new interest rate, which was set at 23.99%.

After receiving the letter, Askew fell behind on his payments and HRFC took steps to collect on the account. Over a period of seventeen months, HRFC contacted Askew five times by letter or telephone to seek repayment. Askew alleged that HRFC made false and threatening statements, including that it had reported him to state authorities for fraud for failing to insure his car and attempting to conceal it from repossession agents, that a replevin warrant had been prepared, and that his complaint in this case had been dismissed.

Askew filed the present suit in state court, alleging violations of CLEC, the MCDCA, and breach of contract based on the alleged failure to comply with CLEC. After HRFC removed the case to federal court, the district court granted HRFC’s motion for summary judgment on all claims.

Askew’s Claim that HRFC Violated CLEC and Accordingly Was in Breach of Contract

Under Maryland’s CLEC, credit grantors can elect to make a loan governed by CLEC that sets a maximum interest rate of 24%, which “must be expressed in the agreement as a simple interest rate.” Md. Code § 12-1013.1. If a creditor violates this provision, it may generally only collect the principal of the loan, but not interest, costs, fees, or other charges. Md. Code § 12-1018(a)(2). However, CLEC, also has two safe harbor provisions. One allows creditors to avoid liability “for any failure to comply with CLEC” through self correction “if, within 60 days after discovering an error . . . the credit grantor notifies the borrower of the error and makes whatever adjustments are necessary to correct the error.” Md. Code § 12-1020. The second safe harbor offers protection from liability where a creditor “unintentionally and in good faith” failed to comply with CLEC. Md. Code § 12-1018(a)(3).

Askew argued that HRFC violated CLEC by failing to expressly disclose in the contract an interest rate below the statutory maximum. The district court rejected the argument, finding that CLEC’s disclosure requirement only mandated that the interest rate be expressed as a simple interest rate. The Fourth Circuit agreed, stating that Askew’s interpretation would create a “meaningless technical requirement while doing little to protect consumers.”

Askew further argued that the “discovery rule” usually applicable in the statute of limitations context should apply to CLEC’s 12-1020 safe harbor, which would mean that HRFC “should have” known of the error when it took assignment of the contract because parties to a contract are presumed to have read and understood its terms.   The meaning of “discovery” in § 12-1020 was an issue of first impression, and the Fourth Circuit determined that “discovering an error” means when the creditor actually uncovers the mistake that violated CLEC. The Court reasoned that this reading better comports with CLEC’s text and purpose, as well as public policy. The Fourth Circuit reasoned that Askew’s reading of the safe harbor would give creditors little incentive to self-correct their mistakes and would work “to exacerbate one of the harms CLEC seeks to avoid—the charging of usurious interest.” Because HRFC discovered its error and attempted to cure the mistake within sixty days of that discovery, the Fourth Circuit affirmed the district court’s finding that HRFC is not liable under CLEC.

The Fourth Circuit also rejected Askew’s contention that because the contract incorporated CLEC’s provisions, HRFC is liable for breach of contract for any deviation, regardless of whether HRFC properly cured the violation. The Court found that the contract incorporated all of CLEC’s provisions, safe harbors included, and that to find differently would lead to an anomalous result by nullifying the safe harbor provisions.

Askew’s MCDCA Claim that HRFC Attempted to Collect Debt Through Improper Threats and Harrassment

 MCDCA § 14-202(6) provides that a debt collector may not “[c]ommunicate with the debtor or a person related to him . . . in any other manner as reasonably can be expected to abuse or harass the debtor.” Askew contended that HRFC violated the MCDCA by making false representations about legal action it had not actually taken by falsely suggesting it had obtained a replevin warrant, reported a notice of complaint to the Maryland Motor Vehicle Administration fraud division for failure to insure his vehicle and hiding the car from the lien holder, and that the present case had been dismissed when it was still pending.

The Court made a distinction between “truthful or future threats of appropriate legal action,” which would not violate MCDCA, and “false representations that legal action has already been taken.” Based on Askew’s allegations, the Fourth Circuit concluded that a reasonable jury could find that HRFC had engaged in conduct reasonably expected to abuse or harass. Accordingly, The Fourth Circuit reversed and remanded the district court’s grant of summary judgment on Askew’s MCDCA claims.

The Fourth Circuit Affirmed in Part and Reversed and Remanded in Part 

Because the Fourth Circuit found that the correct meaning of “discovering an error” in the context of Maryland’s CLEC means when the credit grantor in fact realizes a mistake has been made, the Court affirmed the district court’s grant of summary judgment as to Askew’s claims that HRFC violated CLEC. Similarly, the Court rejected Askew’s breach of contract claim, because to subject a credit grantor to liability for violating CLEC when its conduct falls within a safe harbor of CLEC would be anomalous. However, the Fourth Circuit found that a reasonable jury could find that HRFC engaged in abusive and harassing conduct in violation of MCDCA, and reversed and remanded for further proceedings on that count alone.

 

 

Tags:
11Feb

Order Dismissing Discrimination Complaint Without Prejudice is not Final and Appealable

Categories: 4th Cir. Blog
Comments Off on Order Dismissing Discrimination Complaint Without Prejudice is not Final and Appealable

By Elizabeth DeFrance

On December 9, 2015 the Fourth Circuit Court of Appeals issued a published opinion in the civil case, Goode v. Central Virginia Legal Aid Society. The plaintiff, Freddie L. Goode (“Goode”), appealed the district court’s dismissal without prejudice of his complaint against Central Virginia Legal Aid Society (“CVLAS”) for race and age discrimination. The Fourth Circuit Court of Appeals determined that it lacked jurisdiction because the order of dismissal was not final and appealable.

Complaint for Race and Age Discrimination Dismissed Under 12(b)(6)

Goode is an African-American male, who was seventy-two years old when he was terminated from his position as one of two Senior Managing Attorneys at CVLAS. The Board of Directors made the decision to eliminate Goode’s position during a meeting where it discussed the loss of funding and the need for reorganization. Goode subsequently filed a complaint against CVLAS for race discrimination under Title VII of the Civil Rights Act of 1964 and for age discrimination under the Age Discrimination in Employment Act. The district court granted CVLAS’s motion to dismiss for failure to state a claim under12(b)(6), determining that Goode “failed either to present direct or circumstantial evidence of discrimination or to make out a prima facie case of discrimination.” The district court held that Goode failed to allege sufficient facts to show his job performance was satisfactory at the time of his termination, that he was treated differently than similarly situated employees outside the protected class, and that he was replaced by someone outside the protected class with comparable qualifications. Accordingly, Goode’s case was dismissed without prejudice, and he filed a timely appeal.

When A Complaint Is Dismissed Without Prejudice, It Is Not Appealable

Under 28 U.S.C. § 1291, the Court may only exercise jurisdiction over final orders (and certain interlocutory and collateral orders not at issue in this case). When a complaint is dismissed without prejudice, it is not a final order “unless the grounds for dismissal clearly indicate that no amendment in the complaint could cure the defects in the plaintiff’s case.”

Defects in The Complaint Were Curable

The Court concluded that Goode could cure the defects in his complaint by amending it to plead specific facts supporting his contentions that his job performance was satisfactory at the time he was terminated, that he was treated differently than similarly situated employees outside the protected class, and that his job duties were dispersed to remaining, younger employees. Nothing in the district court’s order indicated Goode would not have the opportunity to amend his complaint to include such facts. Therefore, the order of dismissal was not final because the district court’s order did not clearly indicate that no amendment could cure the defects in the complaint.

In his appeal, Goode alleged that the district court used an erroneous legal standard to dismiss his case. However, the Court declined to take up this issue because the “district court maintains authority over a case until it issues a final and appealable order.”

Dismissed for Lack of Jurisdiction

Because the district court’s order did not clearly indicate that no amendment could cure the defects in the complaint, the order of dismissal was not final and appealable. Therefore, the Court dismissed the appeal for lack of jurisdiction and remanded the case with instructions to allow Goode to amend his complaint.

Tags:
5Nov

Fourth Circuit Holds that an Employee May Have More than One Employer for Purposes of Title VII

Categories: 4th Cir. Blog
Comments Off on Fourth Circuit Holds that an Employee May Have More than One Employer for Purposes of Title VII

By Whitney Pakalka

On July 15, 2015, the Fourth Circuit released its published opinion in the civil case of Butler v. Drive Automotive Industries, Inc. The Court reversed the lower court’s grant of summary judgment in favor of Defendant, Drive Automotive Industries (“Drive”), the company where Plaintiff was sent to work by a temporary employment agency. The Court found that although the staffing agency employed the Plaintiff, under the joint employment doctrine, Drive was also Plaintiff’s employer for purposes of this Title VII action.

Butler’s Allegations of Harassment and the District Court’s Grant of Summary Judgment

Brenda Butler was hired by a temporary employment agency, ResourceMFG, to work at a Drive factory in Piedmont, South Carolina. Drive hired some of its employees through temporary employment agencies and some directly. Drive set Butler’s work schedule, arranged for part of her training, and supervised her on the factory floor. Butler was told by ResourceMFG that she worked for both Drive and Resource MFG. For its part, ResourceMFG required that Butler wear its uniform at work, paid Butler her earnings, controlled discipline and termination, and had a special parking lot for its employees.

According to Butler, one of the Drive supervisors, John Green, repeatedly harassed her verbally and physically by making comments about her buttocks and rubbing his crotch against her buttocks. Butler reported the conduct to a ResourceMFG representative and to Green’s supervisor at Drive, Lisa Gardner Thomas, but Butler claims that no action was taken.

In December 2010, Butler refused to work on a particular machine after she was instructed to by Green, who called her “big booty Judy” when she refused. Butler informed Thomas of the encounter. Thomas then asked another supervisor at Drive to terminate Butler’s employment. A few days later, Green called Butler and implied that if she performed sexual favors for him, he could save her job. She then received a call from a ResourceMFG supervisor informing her that her employment had been terminated.

Butler filed a Title VII employment discrimination action in the District Court for the District of South Carolina alleging sexual harassment. Drive filed a motion for summary judgment arguing that Butler worked for ResourceMFG, and therefore Drive was not her “employer.” The district court recognized that under the joint employment doctrine an employee can have multiple employers, but concluded that Drive was not an additional employer and granted it summary judgment.

The Joint Employment Doctrine and the Hybrid Test for Determining Who is an “Employer” Under Title VII

 The Fourth Circuit reviewed the district court’s grant of summary judgment and its interpretation of Title VII de novo. The Court addressed whether the joint employment doctrine applies to Title VII cases in the Fourth Circuit, and whether the District Court correctly applied the doctrine.

The Court affirmed the District Court’s finding that an employee can have more than one employer, stating that the joint employment doctrine applies when an employer contracts with an independent company for the use of its employees, but then retains control over the terms and conditions of employment. Rivas v. Feceración de Asociaciones Pecuarias de P.R., 929 F.2d 814, 820 n.17 (1st Cir. 1991). The Court formally adopted the doctrine in the Title VII context finding that it is consistent with both Fourth Circuit and Supreme Court precedent that focused on who exercises control over the employee. The Court further found that this interpretation was consistent with the remedial purpose of Title VII and recognizes the reality of modern employment, where many workers are employed by temporary staffing agencies that do not control their day-to-day employment.

The Fourth Circuit found that the district court conducted an inappropriate analysis under its newly-articulated joint employment doctrine. The Court noted that various circuits have applied different tests, all of which aim to determine, based on the facts of the case, whether an entity exercises such control over an employee that it should be liable under Title VII. See Clackamas Gastroenterology Assoc., P.C. v. Wells, 538 U.S. 440, 448 (2003).

The Fourth Circuit adopted a multi-factor hybrid test for determining when an employee is jointly employed in Title VII cases. The hybrid test balances the “control” test’s focus on agency with the “economic realities” test’s focus on the degree to which an employee is economically dependent on the entity in question. The hybrid test considers nine fact-specific factors, none of which are said to be dispositive. However, the Court placed the greatest emphasis on three factors: (1) which entity has the power to hire and fire the employee; (2) to what extent the employee is supervised by the entity; and (3) where and how the work takes place.

Drive Automotive was Butler’s Employer and May be Held Liable Under Title VII

Applying the newly-articulated hybrid test to the facts of the case, the Court held that ResourceMFG and Drive were Butler’s joint employers. The Court noted that Drive had a great deal of control over the terms of Butler’s employment and was able to successfully request that she be terminated. Indeed, Drive had never been refused when it requested that ResourceMFG fire an employee. Additionally Drive supervised its employees and ResourceMFG’s employees alike. Both types of employees did substantially the same work on the same equipment, and that work comprised the core of Drive’s business. 

Fourth Circuit Reversed and Remanded

The Fourth Circuit found that the district court had not paid sufficient attention to factors that militated in favor of finding that Drive was Butler’s joint employer. After establishing the joint employment doctrine and the hybrid test for the Fourth Circuit in Title VII cases, the Court reversed the district court’s grant of summary judgment in favor of Drive and remanded for consideration of Butler’s claims against Drive on the merits.

 

 

 

 

 

Tags:
4Nov

Fourth Circuit Upholds Summary Judgment for Lender Under Maryland’s Credit Grantor Closed End Credit Provisions

Categories: 4th Cir. Blog
Comments Off on Fourth Circuit Upholds Summary Judgment for Lender Under Maryland’s Credit Grantor Closed End Credit Provisions

parking-825371_640

By Sarah Walton

On August 6, 2015, the Fourth Circuit issued a published opinion in the civil case of Gardner v. GMAC. The Fourth Circuit affirmed the district court’s holding that the plaintiffs were not entitled to relief under Maryland’s Credit Grantor Closed End Credit Provisions (“CLEC”) because CLEC requires that borrowers repay their principal loan balance before they can obtain additional relief.

Origins of the Dispute

This appeal consolidated two class action suits. Plaintiffs Gladys Gardner and Randolph Scott (“Gardner and Scott”) entered into sales agreements with defendant GMAC, Inc. (“GMAC”). Their contracts designated CLEC as the governing law. Gardner and Scott both made payments on their car loans, but subsequently defaulted. GMAC repossessed their vehicles and sold them at auction, but were unable to recover the full value owed on the loans. Because GMAC did not recoup the full value of the loans, it issued a post-sale notice to account for the deficiency. Gardner and Scott then filed complaints against GMAC alleging, in pertinent part, that GMAC failed to meet the notice requirements under CLEC. Gardner and Scott argued that GMAC mischaracterized the sale as “public” instead of “private,” which affected its disclosure obligations under CLEC. Gardner and Scott argued that the auction was private because it required a refundable entrance fee.

The district court initially determined that the auctions were public and granted summary judgment to GMAC. On appeal, the Fourth Circuit certified the question to the Court of Appeals of Maryland. The Court of Appeals, in Gardner v. Ally Financial, determined that the auctions were private. The Fourth Circuit subsequently remanded the cases to the district court. The district court granted summary judgment for GMAC on other grounds, concluding that (1) Gardner and Scott were not eligible for relief under CLEC because a balance remained on their loans at the time of sale, and (2) GMAC abandoned its potential claim for a deficiency judgment against Gardner and Scott. Gardner and Scott appealed to the Fourth Circuit.

Gardner and Scott Are Not Entitled to Damages Under CLEC

On appeal, Gardner and Scott argued that they were entitled to damages under CLEC because GMAC failed to properly notify them about the sale of their vehicles. Section 12-1018(a)(2) of CLEC restricts a debtor’s relief to amounts in excess of the principal amount due on the loan. The Fourth Circuit reasoned that because Gardner and Scott never paid the principal balance in full, CLEC did not provide a remedy.

Gardner and Scott Could Not Recover Proceeds from the Sale of Their Vehicles

Nevertheless, Gardner and Scott argued that, under CLEC, they were entitled to refunds of the proceeds GMAC received from the sale of their vehicles. The Fourth Circuit dismissed Gardner and Scott’s argument based on the Maryland Court of Appeals’ response to the certification question. The Court of Appeals stated that creditors can retain proceeds from the sale of vehicles even when they do not satisfy CLEC notice requirements. However, creditors who do not satisfy the notice requirements cannot obtain deficiency judgments. Thus, because GMAC abandoned its claims for a deficiency judgment, it did not violate CLEC’s requirements.

Gardner and Scott Are Not Entitled to Equitable Relief

Gardner and Scott next argued that the court should prevent GMAC from (1) seeking a deficiency judgment, (2) using means other than a deficiency judgment to collect the unpaid balance, and (3) collecting fees and interest from the unpaid loan on any future loans Gardner and Scott may take out with GMAC. On Gardner and Scott’s first argument, the Fourth Circuit held that they failed to present a matter in “controversy” because GMAC expressly abandoned its claims for deficiency judgments. The Fourth Circuit also dismissed Gardner and Scott’s second and third arguments, holding that CLEC only prohibited GMAC from recovering under a deficiency judgment. Because the statute is silent on remaining measures that GMAC can use to recover its loss, the Fourth Circuit held that it could not prohibit GMAC from utilizing other methods of recovery.

Fourth Circuit Affirms the District Court’s Judgment

The Fourth Circuit affirmed the district court’s judgment that Gardner and Scott could not recover under CLEC because they (1) did not satisfy their original loan balance, and (2) GMAC abandoned its claims for a deficiency judgment.

Tags:
29Oct

Fourth Circuit Upholds Summary Judgment on Time Barred Claims with Insufficient Facts

Categories: 4th Cir. Blog
Comments Off on Fourth Circuit Upholds Summary Judgment on Time Barred Claims with Insufficient Facts

car-with-keys copy

By Malorie Letcavage

On July 7, 2015, the Fourth Circuit issued its published opinion in the civil case Poindexter v. Mercedes-Benz Credit Corp. Ms. Virginia Poindexter appealed the district court grant of Mercedes-Benz Credit Corporation’s (“MBCC”) motion for summary judgment. That court held that all of Poindexter’s claims were time barred and she failed to demonstrate facts that would support all the elements of her claims. The Fourth Circuit agrred and affirmed the district court’s grant of summary judgment because her claims violated the statute of limitations and she did not point to facts that would sufficiently support the elements of her claims.

Lien on House to Help with Car Payments

In April 2001 Poindexter purchased an Audi from HBL Inc., who then assigned her repayment contract to MBCC. Poindexter then voluntarily participated in the Home Owner’s Choice Program, which allowed her to put a lien on her home by a deed of trust for her outstanding car payments. This structure made the interest she paid on the loan tax deductible. Poindexter signed a Servicing Disclosure Statement acknowledging the mortgage loan was covered by Real Estate Settlement Procedures Act (“RESPA”). Poindexter executed the deed of trust, which had a covenant that MBCC would release the lien when all payments were satisfied.

In 2004 Poindexter traded in her Audi to HBL for a Mercedes-Benz sedan, so she was released from further payments on the Audi. However, MBCC did not record a certificate of satisfaction that would release the deed of trust. Thus, when Poindexter went to refinance her mortgage, she found there was still a lien on her home. She wrote to MBCC and demanded it record a certificate of satisfaction, but MBCC did not do so in a timely fashion. Only after Poindexter filed a complaint did MBCC record a certificate of satisfaction. Poindexter alleged six causes of action:(1) breach of contract; (2) slander of title; (3) violation of RESPA; (4) violation of the Virginia Consumer Protection Act (“VCPA”); (5) violation of Virginia Code § 55- 66.3; and (6) declaratory judgment.

Summary Judgment Appropriate for Breach of Contract Claim

The statute of limitation begins to toll when the debt is satisfied. Since the debt was satisfied in 2004 when the car was traded and Poindexter did not file until 2013, her claim was time barred. Poindexter still argued that the court was equitably estopped from pleading the statute of limitations bars her claim. However, the Court found that Poindexter had not satisfied the elements of equitable estoppel because she did not establish facts that showed she did not have a “convenient and available means” of obtaining information about status of the lien on her home. There was also no evidence on the record whether there was a genuine issue of material fact as to whether MBCC tried to conceal anything or falsely misrepresent anything.

Poindexter also claimed that her previous dealings with MBCC made her believe MBCC had filed a certificate of satisfaction. However, she only cited that she traded in her Audi to support this claim. MBCC made no further statements about certificate of satisfaction. MBCC’s March letter was found to only have an accurate statement about the release of a security interest in her first vehicle and did not contain any security information about her Audi.

Also, Poindexter argued that the district court prematurely granted summary judgment because it did not rule on her motion for discovery. But Poindexter did not show how the information she requested would have created a genuine issue of material fact sufficient to overcome summary judgment. The Fourth Circuit found no error in the grant of summary judgment on the breach of contract claim.

Summary Judgment Appropriate for Slander of Title Claim

The Court found that MBCC did not publish false words with malice that disparaged Poindexter’s title to her property. There was no evidence in the record that showed MBCC had acted with malice or reckless disregard and Poindexter only pointed to the fact that MBCC didn’t file a certificate of satisfaction. However, the Court found this to just be an administrative oversight and showed nothing more than negligence. Therefore, Poindexter did not establish the elements for slander of title. The Court also found it was untimely because it was outside of the five year statute of limitations.

Summary Judgment Appropriate for RESPA Claim

A provision of RESPA states that a response to any “qualified written request” was necessary upon receipt. However, the Court did not find that Poindexter had sent a qualified written request that requested “information relating to the servicing of the loan.” First, her oral communications did not qualify as written requests. Second, the letter from Poindexter’s attorney to MBCC did not have a statement of the reasons or sufficient detail related to the servicing of the loan. That letter only referenced the details of another vehicle, which was not the Audi, for which the deed of trust was recorded so it did not properly identify the “account of the borrower” as RESPA requires.

The Court also found that Poindexter’s correspondence did not relate to the servicing of her loan. The Court followed the reasoning of Medrano v. Flagstar Bank, and held that Poindexter’s request related to the terms of the loan and mortgage and an obligation that arose after the loan was satisfied. Therefore, it did not relate to the receipt of making of loan payments and did not satisfy the elements of a RESPA claim.

Summary Judgment Appropriate for VCPA claim

The VCPA protects against deception or fraud in consumer actions but does not apply to mortgage lenders. The Court held that MBCC was a mortgage lender because after HBL transferred the vehicle loan to MBCC, Poindexter agreed to modify the car payment agreement and place a lien on her house. Thus, the vehicle loan was converted into a mortgage loan.

The Court further reasoned that both parties had a clear intent that the payment arrangement be a mortgage loan. Also, Poindexter reaped the benefits in tax deductions from it being classified as a mortgage loan so she could not avoid its consequences from such a classification.

Summary Judgment Appropriate for Va. Code § 55-66.3 Claim

This section states the requirements for the filing of a certificate of satisfaction as ninety days after the debt was paid and the consequences if the certificate is not filed. However, Poindexter’s claim was time barred. Her cause of action accrued on the ninety-first day after her obligations were satisfied in 2004. Since she did not enter a complaint until 2013, her claim was outside of the two-year time limit.

Summary Judgment Affirmed

The Fourth Circuit affirmed the district court’s granting of summary judgment for MBCC on each count. The Court held that these claims were either outside of the applicable statute of limitations or that Poindexter had failed to establish all the elements of her claims.

Tags:
12Oct

Fourth Circuit Affirms Summary Judgment on False Advertising Claims

Categories: 4th Cir. Blog
Comments Off on Fourth Circuit Affirms Summary Judgment on False Advertising Claims

9-11-14 Letter to Southeast Toyota Finance

By Sarah Walton

On June 18, 2015, the Fourth Circuit issued a published opinion in the civil case of Design Resources, Inc. v. Leather Industries of America. The court held that Defendants’ statements about leather products were not false or misleading descriptions of fact, and therefore did not meet the standard for false advertising.

Origins of the Dispute

Plaintiff Design Resources, Inc. (“DRI”) produces furniture coverings and sells them to furniture manufacturers. DRI created a product known as “NextLeather®” (“NextLeather”), which consisted of 61% polyurethane, 22% poly/cotton, and 17% leather. DRI subsequently reached out to Dr. Nicholas Cory (“Cory”), a leather chemist and director of a laboratory owned by Leather Industries of America (“LIA”). DRI sought Cory’s opinion on whether it could market its product as “leather.” Cory told DRI that its product could not be marketed as leather, but suggested that it could market the product as “bonded leather” instead. DRI adopted Cory’s suggestion and marketed its product as bonded leather. In anticipation of the Spring High Point Furniture Market, DRI sold samples of NextLeather to various furniture manufacturers. A few weeks before the High Point event, Ashley Furniture (“Ashley”) ran an advertisement (“Ashley Advertisement”) in a trade magazine that read, “Is It REALLY LEATHER? … Some upholstery suppliers are using leather scraps that are mis-represented as leather …. Know What You Are Buying[.]” Several months later, Cory was quoted in two articles (“Cory’s Statements”), published one week apart, in which he stated that (1) referring to bonded leather products as “leather” was an outright deception, and (2) bonded leather products had the potential to confuse customers because the term did “not represent [the product’s] true nature.”

The District Court Grants Summary Judgment for Cory and Ashley

In February 2010, DRI filed a complaint against LIA, Cory, Ashley, and Todd Wanek, Ashley’s president, asserting false advertising claims under the Lanham Act and violations of North Carolina and Washington law. DRI moved for partial summary judgment and Ashley and LIA filed cross-motions for summary judgment. The district court granted Defendants’ motions and reasoned that (1) the Ashley Advertisement and Cory’s first statement were true, and (2) Cory’s second statement was an opinion, rather than a description of fact.

The Lanham Act

A plaintiff who alleges a violation of the Lanham Act must prove that (1) the defendant made a false or misleading description of fact; (2) the misrepresentation was material; (3) the misrepresentation actually deceived or had the potential to deceive; (4) the defendant placed the false statement into interstate commerce; and (5) the plaintiff was injured or is likely to be injured as a result of the misrepresentation.

DRI Failed to Prove that Defendants’ Descriptions Were False or Misleading Descriptions of Fact

The Fourth Circuit focused on the false or misleading element. For the Ashley Advertisement, the court reasoned that DRI could not prove that it was false or misleading because the advertisement only targeted products wrongly marketed as leather. As a result, the court concluded that customers would not be able to make inferences about DRI’s product because it was properly marketed as bonded leather.

For Cory’s Statements, the Fourth Circuit reasoned that Cory’s first statement was true because referring to bonded leather products as “leather” was misleading. The Fourth Circuit also concluded that Cory’s second statement about the confusing nature of the term “bonded leather” was not a fact, but rather an opinion. The court reasoned that Cory hypothesized that “bonded leather” could potentially confuse customers, but his hypothesis had no basis in fact. As a result, the court held that DRI could not succeed on the first element of the Lanham Act.

The Fourth Circuit Affirms the District Court’s Grant of Summary Judgment

Because DRI could not prove that the advertisements and statements at issue were false or misleading descriptions of fact, the court concluded that DRI could not succeed on its false advertising claim. Accordingly, the Fourth Circuit affirmed the district court’s grant of summary judgment to Cory and Ashley.

 

 

 

 

Tags:
10Oct

Fourth Circuit Affirms Summary Judgment on Qualified Immunity Grounds

Categories: 4th Cir. Blog
Comments Off on Fourth Circuit Affirms Summary Judgment on Qualified Immunity Grounds

POLICE 10

By Sarah Saint

On June 15, 2015, the Fourth Circuit issued a published opinion in the civil case of Hunter v. Town of Mocksville, North Carolina. Plaintiffs Keith L. Hunter (“Hunter”), Rick A. Donathan (“Donathan”), and Jerry D. Medlin (“Medlin”)—officers of the Mocksville Police Department (“MPD”) in Mocksville, North Carolina—were concerned about corruption in the MPD and reached out to the North Carolina Governor’s Office as public citizens. Public employees still have First Amendment rights when they speak as “citizen[s] on a matter of public concern.” Lane v. Franks, 134 S. Ct. 2369, 2378 (2014) (quotation marks and citation omitted). Accordingly, Plaintiffs enjoy First Amendment protection in their outreach. The Fourth Circuit affirmed the district court’s denial of summary judgment to Defendants Robert W. Cook (“Cook”), Administrative Chief of Police of the MPD, and Christine W. Bralley (“Bralley”), Town Manager of the Town of Mocksville.

Misconduct in the MPD

Plaintiffs Hunter, Donathan, and Medlin became concerned with Defendant Cook’s behavior and leadership as police chief. Plaintiffs saw him excessively drink alcohol in public and in uniform, which they felt reflected poorly on the police department. They also believed Cook drove a police car with blue lights flashing and behaving as a law enforcement officer when he had never been certified, in violation of the law. Further, Plaintiffs suspected Cook misused public funds for personal gain, racially discriminated, and “fixed” tickets for his friends.

Plaintiffs reported their concerns to Defendant Bralley but saw no improvement and worried about retaliation. Deputy police chief Daniel Matthews (“Matthews”) criticized Donathan regarding his concerns he raised with Bralley, and Cook demoted Medlin.

In November 2011, Cook reorganized the department, giving Matthews a promotion to second-in-command and demoting Hunter, one of only two African-Americans in the MPD. Hunter subsequently filed a grievance but his concerns were dismissed. Donathan was promoted and instructed to “adhere to the ‘politics’ of the MPD.” The next month, the three Plaintiffs and two other officers met privately to discuss their concerns and decided to seek outside investigation as private citizens.

Plaintiffs met with the National Association for the Advancement of Colored People (“NAACP)”, which advised them to contact a state agency. Hunter purchased a disposable phone so they could report their citizen complaints separately from their affiliation with the MPD. They then contacted the North Carolina Attorney General with the disposable phone. The Attorney General referred them to local individuals closely aligned with Cook, and the Plaintiffs felt they could not contact them. Plaintiffs called the North Carolina Governor’s Office with the disposable phone and expressed their concerns with no identifying details. Donathan later identified the MPD to the Governor’s Office, and the Governor’s Office offered to report their concerns to the State Bureau of Investigation (“SBI”).

The next week Medlin saw a local SBI agent at the MPD and noted the SBI agent had a close relationship with Cook and Mathews. The agent called the disposable phone, but the Plaintiffs did not return the call and disposed of the disposable phone because they felt they could not trust the agent. The phone was found, and the agent contacted the Davie County Sheriff’s Office to see if the phone belonged to anyone at the Sheriff’s Office. The Sheriff’s Office contacted the MPD and asked to run the number through MPD records. Bralley set up an online Sprint account and saw that both Donathan and Medlin had called and received calls from the disposable phone using their MPD-issued mobile phones.

MPD Fired Plaintiffs in Retaliation

Cook fired all three Plaintiffs for “conduct unbecoming a Officer” at the end of December 2011, the first time he had fired anyone at MPD, even though officers had used illegal drugs and engaged in criminal activity during his tenure. Later, in a memo to the town attorney, Cook mentioned Plaintiff’s call to the Governor and SBI and claimed the Plaintiffs conspired to discredit Cook, Bralley and others.

District Court Denied Summary Judgment to Defendants

In April 2012, Plaintiffs brought suit against Cook, Bralley, and the Town of Mocksville alleging their First Amendment rights were violated because they were fired for speaking out about corruption at the MPD. After filing an answer and engaging in discovery, Defendants moved for summary judgment. In October 2013, the district court granted summary judgment to all Defendants on the Section 1983 claims but denied summary judgment on the state law wrongful discharge and constitutional claims. The district court granted a motion for reconsideration and reversed course as to Cook and Bralley, holding that they were not entitled to qualified immunity.

District Court Rightfully Rejected Defendants’ Motion for Summary Judgment on Qualified Immunity Grounds

Qualified immunity shields government officials “who commit constitutional violations but who, in light of clearly established law, could reasonably believe that their actions were lawful.” Henry v. Purnell, 652 F.3d 524, 531 (4th Cir. 2011) (en banc).

The Fourth Circuit rejected the Defendants’ argument that Cook and Bralley are entitled to qualified immunity—arguing that no constitutional violation occurred because Plaintiffs spoke as public employees and not citizens, so the First Amendment does not protect Plaintiffs from retaliation. Courts must balance the interests of the public employee as a citizen with the right to speak out with the state’s interest in controlling the operation of the agencies. This balancing test has two steps. The first step asks whether the public employee spoke as a citizen on a matter of public concern. If the answer is no, the employee does not have First Amendment protections. If the answer is yes, the next step asks whether the public employee’s interest in speaking out about the matter of public concern outweighs the government’s interest. The first step is the primary concern of this appeal. To determine whether the public employee spoke as a citizen, the court must consider the employee’s daily professional activities.

The Defendants contend that reporting crimes is the daily professional activities of police officers like the Plaintiffs. However, the Court found calling the Governor’s Office and reporting concerns about the MPD are not part of officers’ daily professional activities. Accordingly, the Fourth Circuit found that the Plaintiffs were acting as private citizens, not public employees, speaking out on matters of public concern. Defendants asserted no countervailing state interest.

The Fourth Circuit also rejected the Defendants’ argument that Cook and Bralley are entitled to qualified immunity because the rights were not clearly established at the time. The dispositive inquiry is whether it would be clear to a reasonable officer that his conduct was unlawful. Here, it was clearly established in the Fourth Circuit that an employee’s speech about serious government misconduct is protected under the First Amendment. Therefore, the district court rightfully denied qualified immunity to Cook and Bralley on the bases that no violation occurred and that the law was not clearly established. Accordingly, the Fourth Circuit affirmed the judgments of the district court.

Dissent

Judge Niemeyer dissented because he would grant qualified immunity to Cook and Bralley. It was not clear to Cook and Bralley at the time the officers were fired that they had complained as citizens and not as employees. It was not clear as a matter of law that police officers complaining to the Governor’s Office about departmental corruption is speech by a citizen and not an employee. Had they complained as employees, they would not have First Amendment protections and retaliatory firing would have been lawful. Officials should not be held liable for “bad guesses in grey areas.” Maciariello v. Sumner, 973 F.2d 295, 298 (4th Cir. 1992). To the dissent, Cook and Bralley made a bad guess in a grey area and accordingly should not be held liable.

Tags:
8Oct

Fourth Circuit Reverses Summary Judgment in Action by Additional Insured Party Seeking Defense from the Insurer in Underlying Tort Claim

Categories: 4th Cir. Blog
Comments Off on Fourth Circuit Reverses Summary Judgment in Action by Additional Insured Party Seeking Defense from the Insurer in Underlying Tort Claim

file8631265473378

 By Whitney Pakalka

The Fourth Circuit issued a published opinion on June 10, 2015 in the civil case of Capital City Real Estate, LLC v. Certain Underwriters at Lloyd’s London. Capital City Real Estate (Capital City) filed a declaratory action against Underwriters at Lloyd’s London (Underwriters) seeking a declaration that the Underwriters had a duty to defend Capital City in an underlying tort action. Finding that the insurance policy covered Capital City as an additional insured in the underlying tort claim, the Fourth Circuit reversed the District Court of Maryland’s grant of summary judgment in favor of the Underwriters.

The Insurance Policy and Underlying Tort Claim

Capital City was the general contractor on a renovation project in Washington D.C., a project that required excavation, structural, and underpinning work. Capital City hired Marquez Brick Work, Inc. (Marquez) as a subcontractor to complete the foundational, structural, and underpinning work. Capital City and Marquez entered into a sub-contract that required Marquez to indemnify Capital City for damage caused by Marquez’s work and to maintain general liability insurance with a policy that named Capital City as an additional insured. Underwriters issued an insurance policy to Marquez, and shortly thereafter issued an endorsement amending the policy to provide coverage to Capital City, but only with respect to liability caused, in whole or in part, by the acts or omissions of Marquez.

After the policy became effective, a support wall at the site collapsed and damaged the adjacent property, which was owned by Leon Yates and insured by Standard Fire Insurance Company (Standard Fire). Standard Fire filed suit against Capital City and others, but made no mention of Marquez in the complaint. The complaint alleged that Capital City submitted plans for a building permit that did not detail the excavation or the plans for support to the underpinnings or common walls of the project. The complaint attributed the wall’s collapse to the negligence of Capital City. Capital City filed a third-party suit against Marquez, alleging that the subcontract required Marquez to defend and indemnify Capital City against claims for liability where the subject of the suit was Marquez’s work.

After the Underwriters denied coverage, Capital City filed a declaratory judgment action in the District Court of Maryland, seeking a declaration that Underwriters have a duty to defend the company in the underlying tort action. Both parties filed cross-motions for summary judgment, and the District Court ruled in favor of the Underwriters.

Choice of Law and the Test for Determining an Insurer’s Duty to Defend

The Fourth Circuit determined that Maryland law applied because the appeal stems from a diversity action filed in the District of Maryland and because Maryland follows the principle of lex loci contractus. This principle requires the application of the state’s law where the contact was made, as indicated by where the ultimate act occurred that made the contract binding. Perini/Tompkins Joint Venture v. Ace Am. Ins. Co., 738 F.3d 95, 100 (4th Cir. 2013). Here, the ultimate act that made the policy binding was its delivery, which occurred in Maryland.

To determine whether the insurer has a duty to defend an insured in an underlying action, Maryland courts apply the two-part test articulated in St. Paul Fire & Maritime Insurance Co. v. Pryeski, 438 A.2d 282 (Md. 1981). The test first considers the scope of the coverage and the defenses available under the policy based on the language and requirements of the policy, and then considers whether the underlying tort allegations for which coverage is sought potentially bring the claim within the policy’s coverage. Id. at 285.

The Fourth Circuit noted that Maryland does not follow the traditional rule that insurance policies are to be construed against the insured, but instead follows ordinary contract principles. Empire Fire & Marine Ins. Co. v. Liberty Mut. Ins. Co., 699 A.2d 482, 494 (Md. 1997). One such principle is that a policy is to be construed against the drafter, in this case, Underwriters. Id. The Court articulated the well-established principle that when a contract’s terms are unambiguous, they must be given their ordinary meaning. Kendall v. Nationwide Ins. Co., 702 A.2d 767, 76 (Md. 1997).

In Maryland, an insurer must defend against the underlying claim if there is potentiality that the claim could be covered by the policy. Cont’l Cas. Co. v. Bd. of Educ., 489 A.2d 536, 542 (Md. 1985). To determine whether there is potentiality of coverage, courts generally look to the pleadings, but the insured may use extrinsic evidence to demonstrate potentiality where the allegations of the complaint are unclear. Aetna Cas. & Sur. Co. v. Cochran, 651 A.2d 859, 863, 866 (Md. 1995). This policy ensures that an insured “is not foreclosed from receiving the defense to which it is entitled merely because the complaint fails to plead allegations that establish potentiality of coverage.” Id.

The Fourth Circuit Determined that the Underlying Tort Claim was Within the Scope of Coverage and that the Underwriters Owed a Duty to Defend Capital City

The Court found that the relevant part of the policy was based upon a form supplied by the Insurance Services Office (ISO), which develops standard policy forms that it files with each state’s insurance regulators. Although the Maryland appellate courts have not addressed the language at issue here, the Fourth Circuit looked to interpretations by the Fifth Circuit Court of Appeals as well as by insurance law commentators in deciding that the language of the policy covers Capital City in the underlying tort claim. These sources both teach that the language of a policy creates a duty to defend if the underlying claim alleges that the named insured or one acting on its behalf caused the damage. In this case, Underwriters argued that the policy only covered Capital City against vicarious or derivative liability, but the Fourth Circuit rejected this argument because the policy omitted any such limitation. The Court concluded that the plain language “provides for exactly what it says: coverage to Capital City for property damage caused by Marquez.” The Court further found that, even if construed as ambiguous, the policy covered Capital City for property damage caused in whole or in part by Marquez because the Court is obligated to construe the policy against the Underwriters, as the drafters of the contract.

The Fourth Circuit next considered whether the underlying allegations brought by Standard Fire potentially brought the tort claim within the coverage of the policy. The Court found that although the underlying complaint was silent about Marquez’s involvement in the wall’s collapse, it alleged that Capital City negligently failed to properly excavate and support the structure. It was, however, undisputed that Marquez was involved in the excavation and support work. Additionally, Capital City filed a third-party action against Marquez and also proffered extrinsic evidence to demonstrate that Marquez caused the wall’s collapse. Underwriters contended that the underlying complaint sought damages on the theory that Capital City failed to submit appropriate construction plans in its application for a building permit. The Fourth Circuit found that it would be “absurd to think that such allegations rest solely on the submission of construction plans,” and not on negligence in the actual construction work. The Court found that there is potentiality of coverage and that the Underwriters have a duty to defend Capital City in the underlying tort action.

Grant of Summary Judgment Vacated and Remanded 

The Fourth Circuit held that the policy coverage extended beyond the acts or omissions of Marquez for which Capital City was vicariously liable, and covered the underlying tort claim. It further concluded that the underlying tort complaint created a potentiality of coverage. The Court therefore reversed the grant of summary judgment and remanded for a determination of whether Capital City is entitled to recover its expenses, including attorney’s fees.

Tags:
7Oct

Fourth Circuit Holds that Litigants Cannot Bring Public Sector Discrimination Claims Under Title II

Categories: 4th Cir. Blog
Comments Off on Fourth Circuit Holds that Litigants Cannot Bring Public Sector Discrimination Claims Under Title II

 

Picture

By Sarah Walton

On June 15, 2015, the Fourth Circuit issued a published opinion in the civil case of Reyazuddin v. Montgomery Cnty., Maryland. The Fourth Circuit held that genuine disputes of material fact precluded summary judgment for Montgomery County on the plaintiff’s failure to accommodate and disparate treatment claims. The court affirmed the district court’s grant of summary judgment to Montgomery County on the plaintiff’s Title II claim.

Origins of the Dispute

Plaintiff Yasmin Reyazuddin (“Reyazuddin”) worked for Montgomery County’s Department of Health and Human Services. Reyazuddin, who is blind, assisted individuals who were looking for information about the department’s services. In October 2009, Montgomery County informed Reyazuddin’s unit that they would be moving to a new worksite. The new worksite did not have the technology necessary for Reyazuddin to perform all aspects of her job. Reyazuddin expressed this concern to her supervisor and subsequently left for vacation. When Reyazuddin returned, her coworkers had already transferred to the new location. Reyazuddin was eventually transferred to the Montgomery County Aging and Disability Unit, but her managers were unable to give her steady work. Ultimately, Reyazuddin’s manager informed her that she would not receive a transfer to the new worksite because the required software was too expensive. When Montgomery County announced that it was hiring an employee at the new worksite, Reyazuddin submitted her application. Ultimately, Montgomery County hired another applicant.

The District Court Granted Summary Judgment for Montgomery County

Reyazuddin filed a complaint against Montgomery County, which alleged that Montgomery County violated Section 504 of the Rehabilitation Act when it: (1) failed to accommodate her disability at the new worksite, and (2) discriminated against her when it refused to transfer her to the new worksite. Reyazuddin also alleged that Montgomery County violated Title II of the Americans with Disabilities Act (“ADA”) by failing to hire her for the vacant position. On the parties’ cross-motions for summary judgment, the district court granted Montgomery County’s motion on all of Reyazuddin’s claims.

The Fourth Circuit Reversed on the Failure to Accommodate Claim

The parties disagreed about the following aspects of Reyazuddin’s failure to accommodate claim: (1) whether Reyazuddin proposed a reasonable accommodation that would allow her to perform the essential functions of her job, (2) whether Reyazuddin’s current employment at the Aging and Disability Unit was comparable to her prior responsibilities, and (3) whether the proposed accommodation constituted an undue hardship on Montgomery County.

The Fourth Circuit rejected Montgomery County’s argument that Reyazuddin’s proposed accommodation would not allow her to perform the essential functions of her job. The court relied on testimony indicating that Reyazuddin could perform the position’s essential functions with an accommodation. Further, the Fourth Circuit determined that Reyazuddin’s current employment arrangements did not provide enough work for a full-time position, which made it incomparable to Reyazuddin’s prior position. As a result, the court determined that there were genuine issues of material fact regarding Reyazuddin’s proposed accommodation and Montgomery County’s comparable accommodations.

The Fourth Circuit also rejected the district court’s reasoning that the cost of installing the necessary computer software created an undue hardship on Montgomery County. The court reasoned that the cost of alternate computer software should have been balanced against other factors to determine whether it constituted an undue hardship. Consequently, the Fourth Circuit reversed the district court’s grant of summary judgment to Montgomery County on the failure to accommodate claim.

The Fourth Circuit Reversed on the Disparate Treatment Claim

The district court concluded that because Reyazuddin’s accommodation was an undue hardship on Montgomery County, they had a nondiscriminatory reason for failing to transfer her to the new worksite. The Fourth Circuit reasoned that because the district court did not properly balance the factors for the undue hardship test, it could not rely upon the undue hardship analysis for the disparate treatment claim. As a result, the Fourth Circuit held that there were genuine issues of material fact on this claim and reversed the district court’s ruling.

The Fourth Circuit Affirmed the District Court’s Determination on the Title II Claim

The Fourth Circuit noted that there was a circuit split on whether plaintiffs could bring a claim under Title II for discrimination in public employment. Ultimately, the Fourth Circuit adopted the majority view and held that Title II applied to an entity’s services to the public, rather than to its interactions with employees. As a result, plaintiffs who work in the public sector cannot bring a claim for discrimination under Title II. Consequently, the Fourth Circuit affirmed the district court’s holding on the Title II claim.

The Fourth Circuit Affirmed in Part, Reverses in Part, and Remands for Further Proceedings

The Fourth Circuit reversed the district court’s grant of summary judgment to Montgomery County on the failure to accommodate and disparate treatment claims and affirmed the district court’s decision on the Title II claim.

 

Tags:
24Sep

Fourth Circuit Affirms Denial of Correction Officers’ Motion for Summary Judgment in Excessive Force Case

Categories: 4th Cir. Blog
Comments Off on Fourth Circuit Affirms Denial of Correction Officers’ Motion for Summary Judgment in Excessive Force Case

By Whitney Pakalka

On May 19, 2015, The Fourth Circuit issued a published opinion in the civil case of Ussery v. Mansfield, 786 F.3d 332. Sammy Ussery filed suit under 42 U.S.C. § 1983 alleging that officers at the North Carolina penal institution where he was incarcerated caused him serious injuries by their use of excessive force. The Fourth Circuit affirmed the district court’s denial of the officers’ motion for summary judgment.

  Ussery Claimed Correctional Officers Used Excessive Force

Sammy Ussery was an inmate at a correctional facility where he was forcibly extracted from his cell by correctional officers on July 9, 2008. Sergeant David Mansfield ordered Ussery to exit his cell so that it could be searched, but Ussery refused because officers repeatedly searched his cell in previous days without discovering any contraband. Sgt. Mansfield then gathered an extraction team of officers, including Officers James Dunlow and Timothy Ruffin, named defendants.

Although prison policy mandates that extractions be videotaped, Sgt. Mansfield stood in front of the video camera during most of the extraction, obstructing the view of Userry’s cell. What can be seen on the video, however, comports with some of Ussery’s account that the officers “beat him repeatedly in the head and face with batons, punches and kicks” and that Sgt. Mansfield “kicked and stomped” on him. Ussery was eventually handcuffed and carried out of his cell, and he was later taken to the hospital for emergency treatment of his injuries.

Several months later, the State Bureau of Investigation conducted an inquiry at the request of the state Department of Corrections to determine whether excessive force was used. However, because the video of Userry’s cell was obstructed by Sgt. Mansfield, the SBI was not able to reach a definitive conclusion.

The District Court Denied One of Defendants’ Motion for Summary Judgment

Ussery filed an action pro se under 42 U.S.C. § 1983 alleging that the officers violated the Eighth Amendment by use of excessive force and for failure-to-protect. Ussery contended that as a result of the force used, he suffered hearing loss, neck pain, loss of vision in one eye, and other injuries that caused him ongoing “physical and emotional pain and suffering, and disability.”

The officers denied punching or kicking Ussery, and argued that he only incurred de minimis injuries. The officers submitted an affidavit of a doctor employed by the Division of Prisons who said that Ussery only had minor injuries with no lasting effects. The doctor based his medical opinion on prison records without examining Ussery. The officers requested summary judgment based on an entitlement to qualified immunity. The district court granted the motion as to the failure-to-protect claim, but denied the motion as to the excessive force claim.

Qualified Immunity from Civil Damages for Excessive Use of Force

In cases where excessive force is claimed, the Fourth Circuit previously applied the standard from Norman v. Taylor, 25 F.3d 1259 (4th Cir. 1994) (en banc). The court in Norman held that a plaintiff cannot prevail on an Eighth Amendment excessive force claim if his injury is de minimis, unles he can show that the use of force was “repugnant to the conscience of mankind.” However, Norman was abrogated by the Supreme Court in Wilkins v. Gaddy, 559 U.S. 34, 38–39 (2010), holding that “[a]n inmate who is gratuitously beaten by guards does not lose his ability to pursue an excessive force claim merely because he has the good fortune to escape without serious injury.”

The Fourth Circuit still applies the standard set out in Norman for cases where the alleged use of excessive force occurred before Wilkins was decided. Thus, because the extraction occurred in 2008, Ussery will have to establish (1) that he sustained more than de minimis injuries, or (2) that the use of force was “of a sort repugnant to the conscience of mankind and thus expressly outside the de minimis force exception.” Norman, 25 F.3d at 1263, n.4.

Jurisdiction for an Appeal from Denial of a Claim of Qualified Immunity

When a district court denies a claim of qualified immunity, it is an appealable final decision under 28 U.S.C. § 1291, “to the extent that it turns on an issue of law.” Mitchell v. Forsyth, 472 U.S. 511, 530 (1985). The Supreme Court further explained that where a district court denies summary judgment to a defendant seeking qualified immunity entirely on the basis of evidentiary sufficiency, no basis for an interlocutory appeal exists. Johnson v. Jones, 515 U.S. 394 (1995).

The district court, in its denial of summary judgment, found that a question of fact existed not only in regard to the extent of Ussery’s injuries, but also as to whether the circumstances were sufficient to show force “repugnant to the conscience of mankind,” thus satisfying the standard in Norman. Because the denial of summary judgment was based on the sufficiency of the evidence, the Fourth Circuit found that it was not permitted to review the lower court’s assessment of the factual evidence.

However, the Fourth Circuit inferred that the district court concluded that Ussery could establish a violation of law under Norman. Finding that this was a “purely legal conclusion,” the Court went on to consider whether the district court properly denied Defendant’s motion for summary judgment.

The officers argued that Ussery only suffered de minimis injuries and could not satisfy the Norman standard. The Fourth Circuit disagreed noting that whether a plaintiff’s injuries satisfy the standard depends on the facts of the case. The Court noted that the injuries Ussery claims may have long-term effects and were arguably more severe than injuries previously held to be sufficient for an excessive force claim. Additionally, the Department of Corrections conducted its own investigation, suggesting that the force used could have resulted in sufficiently serious injuries to meet the standard of Norman.

The Fourth Circuit Affirmed the District Court’s Judgment

Interpreting the facts in the light most favorable to Ussery, the Fourth Circuit affirmed the district court’s denial of Defendants’ motion for summary judgment requested on the basis of qualified immunity.

Tags: