The Facts–Sex at Work

These are the facts according to the complaint in the lawsuit: Tricia Roth was a respiratory therapist working at DeFeliceCare, Inc. in Ohio County, West Virginia, and she was about to go on vacation. She was directed by Leslie DeFelice (the male boss/owner) to come to work sometime during the weekend preceding her vacation in June 2006. She was not told a specific time to come to work during that weekend. When she came to work as ordered, she “observed Defendant [Leslie] DeFelice and/or Michelle Kelly partially clothed and in a compromising position”. Mr. DeFelice instructed Ms. Roth to go into a conference room and wait–meanwhile Mr. DeFelice and the other employee got all their clothes back on. Mr. DeFelice then talked to Ms. Roth and told her to forget about what she had just seen, and threatened Ms. Ross with the loss of her respiratory therapy license and the loss of her employment.

Ms. Roth then went on vacation. When she got back from vacation and returned to work, she had a meeting with Mr. DeFelice that didn’t go well. Ms. Roth told Mr. DeFelice that she hadn’t told anyone about his sexual encounter at work. Mr. DeFelice proceeded to fire Ms. Roth because “he did not like how she was dressed” and “he did not like the style[/]color of her hair”.

Ms. Roth Files Suit–Case Dismissed

Ms. Roth then filed suit on legal theories centering around sex discrimination and sexual harassment, and–bada bing!–the case promptly got dismissed.

Ms. Roth’s complaint (the document which starts the lawsuit and describes the plaintiff’s allegations) focused on the sexual incident I have described above, but also made allegations about other sexual harassment–I will discuss those details below.

Motion to Dismiss Under Rule 12(b)(6)

The important thing to understand about the appeal to the WV Supreme Court is that the defendants immediately filed a motion to dismiss (under Rule 12(b)(6)) based only on the complaint filed by Ms. Roth–there was no evidence that had been accumulated through depositions, affidavits, and the like. The basis for the motion to dismiss was that Ms. Roth had “failed to state a claim upon which relief may be granted.” That motion is based solely “on the pleadings”, and is based on no other evidence.

A motion to dismiss on the pleadings must assume the truthfulness of the allegations in the plaintiff’s complaint, and argues roughly this: even if everything the plaintiff says is true, she still can’t win, because there is nothing about those allegations that would allow her any recovery in court.

Let’s use this as an example to illustrate a motion to dismiss on the pleadings (under Rule 12(b)(6)):

• Suppose my boss fires me, and hands me a notarized resolution issued by the board of directors of my corporate employer saying: “We hereby fire Drew M. Capuder because his socks don’t match. We hate people that can’t clothe themselves with minimal competence. We infer from that characteristic that such people are incompetent employees. Furthermore, we, the board of directors and management of Drew’s employer, harbor an intense personal hatred for such people. We fire Drew with the greatest joy and abandon.” My boss hands me the board resolution and says “you’re fired, and the company security will escort you out immediately”. I say to my boss, “that’s discriminatory”. My boss replies: “Of course it is–we despise people who can’t dress themselves properly”. My boss, who recorded the termination meeting, then hands me a nicely packaged CD recording of the termination meeting as the company security guard quickly ushers me out of the building.
• I file suit for discrimination and wrongful discharge. I initiate the lawsuit by filing a document called a “complaint” which sets out a brief statement of the facts and the legal theories on which I am relying.
• My employer’s defense counsel looks at my complaint, and says to herself: “I don’t have to answer this silly-assed lawsuit. I will file a motion to dismiss, because there is nothing about Drew’s idiotic allegations that our legal system recognizes as valid legal claims”. So the defense lawyer files a motion to dismiss, based only on the allegations in my complaint, under Rule 12(b)(6) of the West Virginia Rules of Civil Procedure. This is the same kind of motion that the defendants filed against Ms. Roth.
• The trial judge reviews the motion to dismiss and my response. The trial judge then takes about 6 nanoseconds to decide that the defendant’s motion should be granted, and–bada bing!–my case is dismissed. This is the same type of decision which the judge made in Ms. Roth’s case (and the correctness of that decision was the issue on appeal).
• The trial judge in my case made the correct decision because, assuming (for purposes of the motion to dismiss) everything I said in my complaint was true, there is nothing about those allegations that establishes any sort of recognized claim for wrongful discharge. In other words, my complaint would not allow me to win in court. It’s as simple as that.
• Contrary to some popular understanding, the law does not prohibit all forms of employment discrimination. The law only prohibits employment discrimination in which the employer’s decision is based on protected characteristics. Those characteristics include race, age, gender, national origin, disability, and religion (and there are other characteristics like certain types of whistle blowing, military service, jury duty, etc.). So if my employer discriminates against me because my socks don’t match, there is nothing about being a fashion moron that constitutes a protected characteristic. My employer is free to lawfully discriminate, and make adverse employment decisions, on that basis. The point of the motion to dismiss in Ms. Roth’s case was that there was nothing about her allegations that involved discrimination based on her sex (gender)–and that was the main issue under review on appeal.

Standards for Dismissal Under Rule 12(b)(6); Iqbal is Rejected

When an employer (or any other defendant) is trying to dismiss a lawsuit under Rule 12(b)(6), the deck is stacked in favor of the employee in the sense that this will be a decision based on only the sufficiency of the allegations in the complaint. The WV Supreme Court has applied these rules in scrutinizing the adequacy of the complaint:

• “liberally construe the complaint so as to do substantial justice”;
• keep in mind that “the preference is to decide cases on their merits”;
• “construe the complaint in the light most favorable to the plaintiff, taking all the allegations as true”;
• dismiss the complaint only if it “appears beyond doubt that the plaintiff can prove no set of facts in support of his claim which would entitle him to relief”, and
• the rules concerning pleadings require that the complaint  merely give “fair notice” of the allegations, and the complaint itself is “not required to set out facts upon which the claim is based”.  (This principle arises out of Rule 8(a) which states that a complaint shall contain a “short and plain statement of the claim showing that the pleader is entitled to relief”. Rule 9(b) then states that allegations of “fraud or mistake” shall be stated “with particularity”, but that “[m]alice, intent, knowledge, and other condition of mind of a person may be averred generally.” The comparable federal Rule 8(a) was the basis for the US Supreme Court in 1957 formulating the “notice” concept for pleadings in Conley v. Gibson, 355 U.S. 41 (1957).)

This last item, the “fair notice” requirement, is key to understanding this case and dismissal motions under Rule 12(b)(6). The point of the complaint in West Virginia is to give “fair notice” of the allegations, and it is not required to set out the allegations in more detail. The “more detail” is something that the parties explore under the “discovery phase” of the lawsuit when documents are requested, depositions are taken, etc.

The US Supreme Court has recently adopted a more stringent system for evaluating complaints in the Rule 12(b)(6) context (the feds have the same rule), with the decisions being Ashcroft v. Iqbal, 129 S. Ct. 1937 (2009), and Bell Atlantic Corporation v. Twombly, 550 U.S. 544 (2007). In Iqbal, the US Supreme Court held:

[t]o survive a motion to dismiss, a complaint must contain sufficient factual matter, accepted as true to state a claim to relief that is plausible on its face.

The US Supreme Court held that “bare assertions” are not entitled to be accepted as true in evaluating a motion to dismiss under Rule 12(b)(6).

The WV Supreme Court in Roth v. DeFeliceCare, Inc., on the other hand, rejected the “more stringent” federal requirement, and stuck with the “fair notice” principles.

The Iqbal decision was a 5-4 split, and has generated a good bit of controversy. Members of Congress have taken steps toward legislatively overturning it. The US House bill (H.R. 4115), called the Open Access to Courts Act of 2009, is in committee, and hearings have been conducted by the House Judiciary Committee. The Bill has not emerged from the Judiciary Committee. In the Senate, a comparable bill called the “Notice of Pleadings Restoration Act of 2009” (S. 1504) has been introduced, and it has not emerged from the Senate Judiciary Committee. Both of these bills would return federal law to the “notice pleading” principles formulated in Conley v. Gibson, 355 U.S. 41 (1957).

Roth’s Hostile Work Environment Claim

The trial court dismissed Ms. Roth’s claim for hostile work environment, which includes claims for sexual harassment.

To “establish a claim for sexual harassment based upon a hostile or abusive work environment” under WV Human Rights Act, the plaintiff must prove

• 1. The subject conduct was unwelcome,
• 2. It was based on the sex of the plaintiff,
• 3. It was sufficiently severe or pervasive to alter the [plaintiff's] conditions of employment and create an abusive work environment, and
• 4. It was imputable on some factual basis to the employer.

The key element for this appeal was the second element. The trial court determined that the weird circumstance described by Ms. Roth in her complaint, when she allegedly stumbled into an area where her boss and another female employee were in some sort of sexual activity, was not any sort of hostile work environment that was “based on the sex of the plaintiff” (element 2 above). (For this purpose, the courts use “sex” and “gender” interchangeably.)

The WV Supreme Court’s opinion discussed whether these allegations could form the basis for a hostile work environment “based on sex“, and Justice Ketchum’s dissent discusses that as well. I am a bit confused by the Court’s opinions (the majority and the dissent) because some of the analysis seems to assume that the only the facts alleged in support of a hostile work environment are the facts relating to the episode of the boss allegedly being in sexual activity with a female coworker. However, the Supreme Court’s opinion makes it clear that there were significant other allegations that supported a claim for hostile work environment:

Defendant DeFeliceCare authorized, directed and acquiesced in the allowance of pervasive, explicit and habitual harassment which included but is not limited to: subjecting [Ms. Roth] to such sexually explicit conduct, threats of loss of license, loss of employment and termination for unwanted sexually explicit conduct she observed.

The key language in that portion is a “pervasive, explicit and habitual harassment which included but is not limited to” the boss’s alleged sexual activity with the coworker described in the complaint. Based on notice pleading requirements, and if the issue is whether the complaint puts the defendant on notice concerning a claim of hostile work environment or sexual harassment, that allegation alone should end the argument. In other words, there were allegations that there were sexual activities creating a hostile work environment above and beyond the episode involving the boss and coworker.

Another allegation in the complaint that is relevant to this issue is:

Ms. Roth was “subjected to improper and sexually explicit conduct by her superiors including the president and CEO Defendant DeFelice… thereby creating a hostile and abusive environment for employment”.

Again, that is clearly making allegations of a hostile work environment that involve superiors other than Mr. DeFelice. So the complaint’s allegations of hostile work environment were not limited to the boss/co-worker-being-partially-undressed episode.

Ultimately,  the WV Supreme Court concluded that Ms. Roth’s allegations in her complaint were sufficient to satisfy the pleadings requirements for a hostile work environment claim.

Ms. Roth’s Claim for “Quid Pro Quo” Sexual Harassment

Ms. Roth also alleged that she was terminated because of the sexual harassment. This is a claim under the WV Human Rights Act for what is generally known as “quid pro quo sexual harassment”, which involves an allegation that a tangible employment decision—here, termination—was related to the sexual harassment. For such a claim, the plaintiff must prove that she was a member of a protected class (here, female), that there was an adverse employment decision (here, termination), and that “but for the plaintiff’s protected status, the adverse decision would not have been made.”

The trial court also dismissed this claim, again on the theory that the complaint did not present any allegation that the termination was based on Ms. Roth’s sex. The WV Supreme Court disagreed and reversed this decision.

The WV Supreme Court discussed whether Ms. Roth’s encounter with her boss and coworker, and the subsequent termination, could be considered “based on the sex” of Ms. Roth, and described a statement made at oral argument by the plaintiff’s attorney, to the effect that a woman might have been fired, and a man might have been retained under the circumstances, because men might view such sexual activity as something to be “admired” (so by inference, there would be no termination), but a woman employee might be disadvantaged under comparable circumstances. The Court described that theory as “speculative at best”, and then focused on what was the real issue: “whether the appellants’ complaint was “sufficiently pleaded”.

For Ms. Roth’s discrimination claim over her discharge, on the issue of whether her discharge was based on her sex, a relevant allegation was that Mr. DeFelice fired Ms. Roth stating that “he did not like how she dressed” and “he did not like the style/color of her hair”. That seems to me to be a pretty gender-based reason for termination (again, that is Ms. Roth’s allegation, and it must be accepted as true in this procedural context).

Ms. Roth’s Claim Discharge in Violation of a Substantial Public Policy

Ms. Roth also alleged wrongful termination under the doctrine first announced by the WV Supreme Court in Harless v. First National Bank in Fairmont, 162 W. Va. 116, 246 S.E.2d 270 (1978), where termination will be actionable if the “motivation” of the employer “is to contravene some substantial public policy principle.” That doctrine has been applied in a number of settings, including whistleblower circumstances, situations where an employee invokes a right such as self defense (in the setting of a store robbery), privacy rights under some circumstances to refuse drug tests, and situations where the employee is terminated because of some testimony in a legal proceeding.

The trial judge decided that the facts did not support any conclusion that there was a “substantial public policy” that the employer was trying to “contravene”.  The WV Supreme Court disagreed and reversed on this decision as well.

Ms. Roth submitted the following three alleged “substantial public policies” at issue which she claimed made the termination unlawful, and the trial court rejected all of them. The WV Supreme Court concluded that the second and third policies could be viable, so that it reversed the decision to dismiss this wrongful discharge claim under the Harless doctrine:

• First: the plaintiff invoked West Virginia statutes concerning public nudity, and the trial court dismissed that as a relevant substantial public policy; and the West Virginia Supreme Court agreed.
• Second: Ms. Roth contended that the sex discrimination and sexual harassment laws under the WV Human Rights Act created substantial public policies, and the West Virginia Supreme Court has previously made it clear under the Harless doctrine that those statutes in fact established substantial public policies which could form the basis of a wrongful discharge claim. However, the trial court implicitly rejected that theory—the trial court didn’t expressly discuss it. The West Virginia Supreme Court disagreed, based on the analysis that I have described above in discussing the hostile work environment claim. This policy and the next (third) policy were raised by Ms. Roth’s counsel in her opposition to the motion to dismiss, and the WV Supreme Court said the trial court should have addressed them in reaching its decision. In other words, the trial court should not have limited its consideration of potential public policies to those described in the complaint.
• Third: Ms. Roth alleged that there was another lawsuit by another female employee for sexual harassment that preceded her own, and in that lawsuit, there had been allegations of a sexual relationship between Mr. DeFelice and the co-worker that was in a state of partial undress with Mr. DeFelice when Ms. Roth walked in right before her vacation. In that other lawsuit, there had been testimony denying the relationship between Mr. DeFelice and the (partially clothed) co-worker. Thus, Ms. Roth had the potential for having testimony in that other lawsuit that could have contradicted the testimony that Mr. DeFelice and the other co-worker were not involved in any sort of relationship. Ms. Roth’s lawyer alleged that DeFeliceCare was violating a substantial public policy in potentially terminating Ms. Roth for her possible testimony in that other lawsuit. The trial court rejected this theory, but the West Virginia Supreme Court disagreed, and concluded that this was a viable theory for a “substantial public policy” being violated. In other words, Ms. Roth’s theory was that she was fired because her observation of the sexual encounter between Mr. DeFelice and the coworker could have been damaging to Mr. DeFelice and his company in that other lawsuit, such that Mr. DeFelice was motivated to terminate Ms. Roth.

So the WV Supreme Court thought the second and third theories above constituted substantial public policies so the dismiss of the Harless claim was inappropriate.

Ms. Roth’s Claim for Retaliation

Ms. Roth also alleged retaliation under the West Virginia Human Rights Act. Retaliation under that Act required that Ms. Roth engaged in some “protected activity” either in the form of (a) opposition to discriminatory behavior, or (b) in the form of participating in connection with some proceeding under the Act. As far as I can tell, the only protected activity alleged by Ms. Roth was the “opposition”, so that was the only type of  protected activity discussed in the WV Supreme Court’s opinion.

The “opposition” protected activity includes “opposition to a practice that the plaintiff reasonably and in good faith believes violated the provisions” of the WV Human Rights Act. The opposition

“must be reasonable in the sense that it must be based on a set of facts and a legal theory that are plausible. Further, the view must be honestly held and must be more than a cover for troublemaking. Thus, even if there was no actionable sexual harassment, the plaintiff could still have engaged in a protected activity if she complained about being sexually harassed.”

The trial court dismissed this claim, and the WV Supreme Court agreed because Ms. Roth had never “engaged in any protected activity”. She had simply never done anything to express any opposition to any of the sexual conduct she claims to have experienced or heard about.

Ms. Roth’s Claim for Intentional Infliction of Emotional Distress

Ms. Roth also alleged a claim for “intentional infliction of emotional distress“, which is an extremely hard claim to prevail upon in an employment setting. The WV Supreme Court described the claim this way:

One who by extreme or outrageous conduct intentionally or recklessly causes severe emotional distress to another is subject to liability for such emotional distress, and if bodily harm to the other results from it, for bodily harm.

The conduct must be

so outrageous in character, and so extreme in degree, as to go beyond all possible bounds of decency, and to be regarded as atrocious and utterly intolerable in a civilized community.

Wow, that sounds tough to satisfy, especially in the workplace, and there are relatively few cases in which plaintiffs have succeeded on that theory. But keep in mind that the issue for purposes of the Supreme Court’s decision was whether Ms. Roth’s pleadings were sufficient to support this claim. The trial court had focused on the fact that there was no allegation that the employer had terminated Ms. Roth in an “outrageous manner”.

But the West Virginia Supreme Court disagreed, and said that the following allegations in the complaint were sufficient::

• 1. Mr. DeFelice called Ms. Roth and asked her to come to the office, and when she complied with that request she was placed “by her employer into unwantedly observing Mr. DeFelice Ms. Kelly in a sexually compromising position.”
• 2. Because of that observation, Mr. DeFelice “threatened” Ms. Roth “not only with termination from her employment, but with possibly losing her respiratory therapist license, which was her means of making a living.”
• 3. Ms. Roth was then terminated “within the same week”, allegedly because Mr. DeFelice “did not like how she dressed or the style and color of her hair.” (The Court thought it was significant that there was a close proximity in time for these allegations.)

Again, this is not the same thing as saying these allegations alone, without any other evidence, would satisfy the requirements for intentional infliction of emotional distress at trial. but it is to say that, with these allegations in the complaint, the Court could not conclude “beyond doubt” that Mr. Roth “can prove no set of facts in support of [her] claim which would entitle [her] to relief.” Thus, the WV Supreme Court reversed the trial court’s decision to dismiss the claim for intentional infliction of emotional distress.

Written by Drew M. Capuder (contact information); Voice: 304-333-5261

Mr. Rice was represented by Mark Atkinson and Paul Frampton at Atkinson & Polak, PLLC, and the defendants were represented by Roger Wolfe at Jackson & Kelly PLLC in Charleston, and Kevin Hyde at Foley & Lardner, LLP in Jacksonville, Florida.

Here is a quick run-down of what was awarded in the case:

• Back pay: $142,659 awarded by jury.
• Pre-judgment interest: $11,791.84 from date of termination through trial.
• Front pay: $1,991,332.00 awarded by jury (from roughly age 48 through retirement age at 67).
• Emotional distress: $0.
• Punitive damages: Jury did not answer question affirmatively which would have allowed award of punitive damages.
• Total judgment based on jury’s verdict: $2,145,782.84, plus post-judgment interest on that amount at 7% per annum.
• Attorneys’ fees: $117,235 awarded by judge (based on $450 an hour for Mark Atkinson and $300 per hour for Paul Frampton).
• Litigation expenses: $20,324.16 awarded by judge.
• Total award: $2,283,342.00 (based on jury verdict, pre-judgment interest, attorneys’ fees and expenses) plus post-judgment interest at 7% per annum.

The Rice case illustrates the risk employers face when they terminate an older, good, long-standing employee, and replace him or her with a much younger person with little or no experience for the employer.

What Happened?

Mr. Rice at the time of his termination (in 2009) was age 47 and had worked for Burke-Parsons-Bowlby Corporation for 24 years. When Mr. Rice was terminated he was the corporate controller.

In the year or so preceding Mr. Rice’s termination, in 2008, Burke-Parsons-Bowlby Corporation was acquired by Stella-Jones, Inc.  Then on February 16, 2009, the company hired Jeremy Stover, age 27-28, as the "assistant controller" under Mr. Rice. There was testimony that Mr. Rice was instructed to teach Mr. Stover "everything you do". There was also evidence that, between the time of the decision to terminate Mr. Rice and the actual termination, there was a significant company audit which required Mr. Rice’s expertise.

The kicker for the defendants was that apparently the company made the decision to terminate Mr. Rice’s employment before hiring younger Mr. Stover. So the sequence of events, according to evidence presented by Mr. Rice,  was: purchase of the old company by Stella-Jones, decision to terminate 47-year-old Mr. Rice (with 24 years of experience), hiring of Mr. Stover at age 27 or 28 (with no experience with the company), getting Mr. Rice to train Mr. Stover, completing the company audit with Mr. Rice’s help, then firing 47-year-old Mr. Rice, and then getting 28 year old Mr. Stover to take over the bulk of Mr. Rice’s job.

Evidence of Discrimination: Conflicting Explanations for the Termination

For proving an age discrimination claim (or, for that matter, any other kind of discrimination claim), one of the standard threads of evidence which supports an inference of discrimination is proof of conflicting explanations by the employer for the reason for the employment decision.

In Mr. Rice’s case, there were allegations that the company had conflicting versions of why it terminated Mr. Rice. The company originally claimed that part of the reason for terminating Mr. Rice was his inadequate performance quality. Then later, the company apparently shifted to the explanation that it simply eliminated Mr. Rice’s position.

Evidence of Discrimination: Replacing an Older Worker with a Substantially Younger One

Another type of evidence which is considered to be supportive of a finding of discrimination is the replacement of the plaintiff-employee in the "protected class" with an employee outside the protected class.

For his age discrimination claim, Mr. Rice was age 47, which meant that he satisfied the statutory requirement for being protected on the basis of age — he was 40 years or older. Mr. Rice was replaced by an employee substantially younger than him, Mr. Stover at age 27 or 28.

The courts have concluded that, for age discrimination, the inference of discrimination arises if the replacement employee is "substantially younger" than the plaintiff, even if the replacement employee is over 40 years of age. In Mr. Rice’s case there were no complications on that issue — Mr. Stover was both under age 40 and substantially younger than Mr. Rice (about 20 years younger).

There was a dispute over whether Mr. Stover in fact "replaced" Mr. Rice, but the following facts were in the record which could have supported the conclusion that the younger Mr. Stover replaced the older Mr. Rice: Mr. Rice was the corporate controller, a decision was made to terminate Mr. Rice, Mr. Stover was hired as "assistant controller", management instructed Mr. Rice to teach Mr. Stover "everything you do", the company then conducted a significant audit (with Mr. Rice’s assistance) to a successful conclusion, the company then terminated Mr. Rice, and Mr. Stover took over most of Mr. Rice’s job responsibilities.

Evidence of Discrimination: Contradicting the Employer’s Explanation

There is a third type of evidence which supports a finding of discrimination: the contradicting of the company’s stated legitimate, non-discriminatory reason for terminating the plaintiff.

The defendants’ initial description of the reason for termination was inadequate job performance. Mr. Rice presented evidence that he had an excellent work history with the company that was free of any disciplinary action.

Damages

The awarded damages in this case are interesting. First, the jury awarded $142,659 in "back pay", which is essentially lost income and lost benefits from the point of termination through the date of trial.

The jury also awarded $1,991,332 for “front pay", which is future (from date of trial) lost income through some point in the future. An expert witness for Mr. Rice calculated future lost income through a projected retirement age of 67. The expert’s calculation of front pay was as I understand it, nearly exactly what the jury awarded: $1,991,332.

So the jury awarded Mr. Rice front pay from his age at trial, which appears to me to have been age 48 or 49, through retirement at age 67 — a total of about 19 years.

An important facet of the jury’s decision on front pay is that it did not reduce its award of front pay by the amount of any income Mr. Rice would be receiving in the future from employment after termination by the defendants. West Virginia has a somewhat unusual characteristic on awards of lost income, both past and future. Ordinarily, and this is also true in West Virginia, the jury would be instructed to take its prediction of lost income in the future (which is calculated by projecting the annual salary and benefits for the plaintiff’s last position with the defendant), and then subtract what the jury believes will be income to be earned by the plaintiff during that same time future time period.

For example, let’s assume that the jury knows that the plaintiff was making $100,000 a year in the last position for the defendant-employer that terminated the plaintiff. In awarding front pay, the jury would first project out that $100,000 each of the next 10 years. Let’s also assume that at time of trial the plaintiff is making $50,000 year at a new job (after his termination), and that job is likely to continue into the future. (For these calculations, I am ignoring the prospects of pay raises, I am ignoring benefits, and I am ignoring any effort to apply a “discount rate” to the future income amounts.) Under this scenario, the jury would subtract the $50,000 of annual wage from the $100,000 figure, for a yearly front pay damage amount of $50,000, and a total front pay award of $500,000 (10 years at $50,000 per year).

Under West Virginia law, however, the jury is instructed that if it concludes termination of the plaintiff was "malicious", then the jury should not subtract the subsequent replacement  income (in my example, $50,000 a year), and should instead award  a “flat” amount for front pay consisting solely of the calculation of the annual wage from the employee’s income with the defendant (in my example, $100,000 per year). That would mean an award of $100,000 per year, and a total award of $1,000,000 (10 years times $100,000).

Obviously, the "malice" rule makes a big difference. In the example I provided above, with 10 years of future lost income, wages of $100,000 per year at the defendant, and wages of $50,000 per year in a subsequent job:  the plaintiff would receive $500,000 in front pay damages if the termination was not malicious. However, the plaintiff would receive $1,000,000 in front pay if the jury concludes that the termination was malicious and does not subtract any of the replacement (post-defendant) job income.

In Mr. Rice’s case, my understanding is the jury awarded the $1,991,332 in front pay based on a conclusion of malice, so the jury did not subtract any income Mr. Rice might receive in the future from any subsequent employment.

The West Virginia Supreme Court most recently reiterated this "malicious termination rule" for back and front pay awards in Peters v. Rivers Edge Mining, Inc., 224 W. Va. 160, 680 S.E.2d 791, 814-815 (2009).

Interestingly, the jury did not award any compensation for emotional distress.

The jury also did not award any punitive damages.

Thus, when you add prejudgment interest to the award of back pay (and the prejudgment interest was $11,791.84), the total amount of damages that the judge awarded based on the jury’s verdict was $2,145,782.84

Attorney’s Fees and Expenses

Because Mr. Rice was the prevailing party in an age discrimination claim under the West Virginia Human Rights Act, he also received from the trial judge after the jury’s verdict an award of reasonable attorney’s  fees and expenses. The lead lawyer for Mr. Rice was Mark Atkinson, who has been practicing about 27 years. Mr. Atkinson has tried several employment discrimination and other wrongful discharge cases in West Virginia to jury verdicts of roughly $1-$3 million each. The trial court approved an hourly rate for Mr. Atkinson of $450. Paul Frampton also tried the case with Mr. Atkinson, has been practicing law for about 7 years, and the trial judge approved an hourly rate for Mr. Frampton of $300. The trial court also approved an hourly rate of $125 for paralegal time.

The trial court then multiplied those hourly rates by the number of hours expended by the lawyers and their legal assistants, and awarded attorneys’ fees of $117,235. The trial court also awarded expenses incurred by counsel for Mr. Rice in the amount of $20,324.16.

Post-Judgment Interest

Under West Virginia law "post-judgment interest" would then be applied to all of those awarded amounts at the rate of 7% per year.

Appeal?

The defendants have filed a motion for new trial, and I don’t have significant information on that motion (it has not been ruled upon as of this date). Given the size of the verdict, it seems likely that an appeal will follow, assuming the trial court does not grant the motion for new trial.

Prepared by Drew M. Capuder (contact information)

Clites Goes To Work For TeleTech And Signs An Arbitration Agreement

The plaintiff, Jill Clites, went to work for TeleTech in October 2004 as a Customer Service Representative. During new employee orientation, Clites met with a human resources representative for about 90 to 120 minutes, during which time Clites reviewed and signed a large number of documents related to the orientation. In the record before the West Virginia Supreme Court, there were disputes over whether individual documents were discussed with Clites and whether she was required to sing all the documents during the orientation session, but it appears that during that session Clites signed an arbitration agreement which TeleTech required of most or all new employees.

Clites remained employed at TeleTech until July 12, 2007, when she was terminated. She then filed suit for sexual harassment and retaliation. Clites alleged she complained about the sexual harassment, that TeleTech failed to take appropriate corrective action, and that TeleTech retaliated against her for the complaint by firing her.

Clites Files Suit In West Virginia Circuit Court

Clites filed suit in West Virginia Circuit Court in Morgantown. TeleTech then invoked the arbitration agreement by filing a motion to dismiss the lawsuit and by filing a separate lawsuit in federal court arguing that Clites waived her rights to a jury trial by signing the arbitration agreement. In essence, TeleTech argued that Clites gave up her rights to file suit and to a jury trial by signing the arbitration agreement, and that her only remedy was to file an arbitration proceeding (with the American Arbitration Association) pursuant to the arbitration agreement.

Judge Russell Clawges ruled that the arbitration agreement was a "contract of adhesion", which simply means that it was a "standardized form, containing no individual terms, offered [by the employer] on essentially a take it or leave it basis." Contracts of adhesion are usually described as contracts offered by the substantially more powerful party in a transaction as allowing for now negotiation–offered on a "take it or leave it" basis. Courts sometimes but not always scrutinize "adhesion contracts" more carefully, especially where they do in fact reflect substantial disparities in negotiation power.

Judge Clawges did not automatically conclude that the arbitration agreement was therefore not enforceable. He looked at the more controversial terms: requiring arbitration to take place in Denver, Colorado (instead of near the place of employment, Morgantown, West Virginia), and requiring the parties to pay their own expenses incurred in the arbitration (which would make the arbitration proceeding significant more expensive for the plaintiff, compared to the cost of filing suit in West Virginia Circuit Court). Those terms would make arbitration significantly more burdensome and expensive for the plaintiff, compared to filing suit and seeking a jury trial. Those results would have made it significantly more likely that a Court would decide the arbitration contract to be "unconscionable", which would make it unenforceable.

TeleTech, to address these more burdensome terms of the arbitration agreement, stipulated (agreed) before Judge Clawges that the location of the arbitration would be Morgantown and that TeleTech would pay for all arbitration costs which would exceed what Clites would have had to pay to file suit in West Virginia Circuit Court.

Judge Clawges, based on the TeleTech stipulation, concluded that the arbitration agreement was not unconscionable, and there concluded it was enforceable.

Clites then appealed to the West Virginia Supreme Court.

The Federal Arbitration Act Does Not Preclude Review

The first issue for the Supreme Court was whether the Federal Arbitration Act, 9 U.S.C. § 1 et seq. ("FAA"), precluded any scrutiny at all over the arbitration agreement in question. The United States Supreme Court has held that the "FAA" established the policy of favoring arbitration of disputes. Moses H. Cone Memorial Hospital v. Mercury Construction Corporation, 460 U.S. 1, 24 (1983). The US Supreme Court also held that the FAA preempts state laws which "undercut" the enforceability of arbitration agreements. Southland Corporation v. Keating, 465 U.S. 1, 11 (1984); Perry v. Thomas, 482 U.S. 483 (1987). This rule also applies to claims specifically created by state legislatures, such as the discrimination claims under the West Virginia Human Rights Act. Mitsubishi Motors Corporation v. Soler Chrysler-Plymouth, Inc., 473 U.S. 614, 628 (1985).

While the West Virginia Supreme Court in Clites recognized the fact that the FAA preempts state laws which would undercut the enforceability of arbitration agreement, it held that the "issue of whether an arbitration agreement is a valid contract if a matter of state contract law" and is "capable of state judicial review."

The Arbitration Agreement In Issue Was Not Unconscionable

So the West Virginia Supreme Court proceeded to review TeleTech’s arbitration agreement to determine whether it was enforceable under West Virginia law.

The standard for reviewing arbitration agreements was set out by the West Virginia Supreme Court as follows: An arbitration clause is "presumed" to be "bargained for" and is presumed to intend that the arbitration proceeding is the "exclusive means of resolving disputes arising under the contract". However, where a party alleges that the arbitration agreement was "unconscionable or was thrust upon him because he was unwary and taken advantage of, or that the contract was one of adhesion", then the question is whether the arbitration agreement was "bargained for and valid", and that question is a "matter of law for the court to determine by reference to the entire contract, the nature of the contracting parties, and the nature of the undertakings covered by the contract." (quoting Board of Education of the County of Berkeley v. W. Harley Miller, Inc., 160 W. Va. 473, 236 S.E.2d 439 (1977) (Syllabus Point 3).

The West Virginia Supreme Court, like Judge Clawges at trial, concluded TeleTech’s arbitration agreement was a "contract of adhesion". But that did not "necessarily means that it is invalid, and to determine its validity we look to other factors"

The next step was to determine "whether the Agreement is unconscionable or was thrust upon [the plaintiff] because [she] was unwary and taken advantage of." An analysis of unconscionability "must focus on the relative positions of the parties, the adequacy of the bargaining position, the meaningful alternatives available to the plaintiff, and the existence of unfair terms in the contract." (quoting Art’s Flower Shop, Inc. v. Chesapeake and Potomac Telephone Company of West Virginia, Inc., 186 W. Va. 613, 413 S.E.2d 670 (1991)).

The Supreme Court then focused on the fact that TeleTech’s human resources employee had a meeting of substantial length (90 to 120 minutes) with Clites, and Clites was required, like all other new employees, to sign an arbitration agreement. Furthermore, apparently because of TeleTech’s stipulation, the arbitration agreement required arbitration in Morgantown instead of Denver, and TeleTech agreed to pay the costs of arbitration beyond the costs of filing suit in Circuit Court.

The Court therefore held that TeleTech’s arbitration agreement was not unconscionable and was therefore enforceable. The result of the decision is therefore that Clites will be required to pursue her claim before the American Arbitration Association, and will not be allowed to proceed to a jury trial in West Virginia Circuit Court.

Importance Of The Clites Decision

The first important aspect of the Clites decision is that the reasonableness of an arbitration agreement should be examined in terms of the agreement itself plus any stipulations (agreements) by the employer that might soften the burdensome effects on the employee/plaintiff. The fact that TeleTech’s arbitration agreement required the arbitration to take place in Denver, and required the employee to bear the substantially higher cost of arbitration, would likely have created problems for the enforceability of the agreement. But TeleTech’s stipulations essentially removed those issues.

Therefore, employers faced with troubling terms in an arbitration agreement, from the standpoint of enforcing it in court, may stipulate after the employee files suit to modify the arbitration agreement to make it more likely to pass judicial scrutiny concerning its enforceability.

The second important aspect of Clites is that the Supreme Court carefully limited its ruling to the facts of that case, and indicated that under other circumstances it would carefully scrutinize the arbitration agreements:

• There may be questions of whether "sufficient consideration was given in exchange for the" arbitration agreement. The Court noted that it had previously ruled that an employer’s "promise merely to review an employment application in exchange for a job applicant’s promise to submit employment-related disputes not associated with the application process to arbitration does not represent consideration sufficient to create an enforceable contract to arbitrate such employment disputes." (quoting State ex rel. Saylor v. Wilkes, 216 W. Va. 766, 613 S.E.2d 914 (2005)).
• The Court notes that its precedent has "historically given close scrutiny to adhesion contracts that abrogate a party’s constitutional entitlement to access to the courts."
• The court would be "troubl[ed]" by forum selection clauses, contained in contracts of adhesion, which would require an employee to arbitrate disputes "in far-away jurisdictions, remotely removed from the employee’s actual place of employment or residence."
• It would be "troubling" for an arbitration agreement to require the employee to be "subject to the substantive law of a far-away jurisdiction".

This Clites decision is discussed in my chart of West Virginia Supreme Court decisions.

Prepared by Drew M. Capuder (contact information); Voice: 304-333-5261

Click the line below to open the chart, which is an Adobe Acrobat PDF:

WV Supreme Court Employment Decisions

(click here to download the free Acrobat Reader, if you don’t already have it installed on your computer).

This chart is copyright protected by Drew M. Capuder and Capuder Fantasia PLLC. You have permission to distribute this chart only if you distribute the chart unedited by anyone other than Drew Capuder. In other words, you may distribute this chart only in its original form as downloaded from Drew Capuder’s Employment Law Blog.

Prepared by Drew M. Capuder (contact information); Voice 304-333-5261

That verdict consists of:

• $200,450 for past lost wages and benefits,

• $900,000 for future lost wages and benefits,

• $150,000 for humiliation,

• $150,000 for emotional distress, and

• $350,000 in punitive damages.

Under the West Virginia Human Rights Act (which prohibits age and other forms of discrimination in the workplace), Nagy’s counsel will file a motion additionally requesting attorneys’ fees and expenses.

James Nagy filed suit in Charleston in March 2008 against West Virginia American Water Company, alleging that he was fired in March 2007 because of his age at 53, after 23 years of employment.

James Nagy was represented by Maria W. Hughes and Stephen Weber at Kay Casto & Chaney PLLC. West Virginia American Water Company was represented by Mychal Schulz at Dinsmore & Shohl LLC.

The case is pending in Circuit Court in Kanawha County, West Virginia, before Judge Jennifer Bailey-Walker.

Prepared by Drew M. Capuder (contact information)

The plaintiff was a pilot, Rao Zahid Khan, who alleged that his co-workers subjected him to frequent derogatory and insulting comments about his national origin and religion (he was Arabic). The West Virginia Supreme Court ruled that Colgan Air (a) was not liable for harassment because it had policies and procedures prohibiting harassment and took swift and decisive action after learning about the harassment, and (b) was not liable for retaliation because Colgan Air terminated the employee (Mr. Khan) for a legitimate and non-discriminatory reason–he failed to pass a mandatory FAA proficiency test for pilots.

Colgan Air was a 3-2 decision. Justices Davis, Maynard, and Benjamin joined in the "per curiam" majority opinion, and Justice Albright dissented and wrote an opinion, and Justice Starcher also dissented and wrote an opinion. Both Justices Albright and Starcher agreed with the majority that Mr. Khan properly lost his job because of his failure to pass the FAA proficiency test, but dissented because they believed that Colgan Air was properly held liable for the hostile work environment (based on religion and national origin).

Summary prepared by Drew M. Capuder (contact information); Voice 304-333-5261