Opinion
Civ. No. 3:98-CV-1254-M.
April 14, 2000.
MEMORANDUM OPINION AND ORDER
Plaintiff sues for gender discrimination and retaliation in violation of the Civil Rights Act of 1964, as amended, 42 U.S.C.A. §§ 2000e- 2(a), -3(a) (parts of "Title VII"); securities fraud violations of 15 U.S.C.A. § 78j(b) and 17 C.F.R. § 240.10b-5 (referred to together as "Rule 10b-5"), TEX. REV. CIV. STAT. ANN. art. 581-33A.(2), and TEX. BUS. COM. CODE ANN. § 27.01; breach of contract; and conversion. Before the Court are Defendant's Objections to Plaintiff's Summary Judgment Evidence and Defendant's Motion to Strike (hereafter referred to together as "Defendant's Motion to Strike"), filed February 7, 2000; Defendant's Motion for Summary Judgment on all Plaintiff's claims, filed January 26, 2000; Plaintiff's Motion for Partial Summary Judgment on all claims but those for breach of contract and conversion, filed January 18, 2000; all briefs in support of those motions, and all responses and replies thereto.
Plaintiff's Original Complaint also alleged wage discrimination, age discrimination and retaliation under the Age Discrimination in Employment Act, securities fraud violations under 15 U.S.C.A. § 78q(a), common law fraud, intentional and negligent misrepresentation, wrongful discharge, breach of the implied covenant of good faith and fair dealing, and exemplary damages. On January 13, 2000, Plaintiff stipulated to the withdrawal of some of these claims, and she has subsequently withdrawn the others.
Having considered the record, applicable law, and arguments of counsel in a hearing held in open court on March 15, 2000, for the reasons stated below, the Court GRANTS IN PART and DENIES IN PART Defendant's Motion for Summary Judgment, DENIES Plaintiff's Motion for Partial Summary Judgment, and DENIES Defendant's Motion to Strike as moot.
I. Background
Defendant Mobile Systems International Inc. ("MSII") was a subsidiary of a British corporation, Mobile Systems International plc ("MSI plc"). MSI plc was a subsidiary of Mobile Systems International Holdings, Ltd. ("MSIH"), also a British corporation.
MSII distributed and supported the software products of its ultimate parent company, MSIH. MSII hired Plaintiff Twilla Skelton ("Skelton") in August 1995 as its Director of Human Resources and Facilities, at an annual salary of $72,000. Skelton reported directly to Colin Robinson ("Robinson"), then the President of MSII. MSII terminated Skelton's employment in October 1997.
A. MSII's Alleged Gender Discrimination and Retaliation
Skelton alleges that on January 1, 1996, MSII established a policy by which all those who directly reported to Robinson ("direct reports") would be promoted to Vice President and would receive an annual salary of no less than $120,000. Soon thereafter, according to Skelton, MSII promoted four male direct reports to Vice President, with annual salaries of at least $120,000. Skelton further notes that another male Vice President surpassed the minimum salary level of $120,000 in August 1996, whereas Skelton, a direct report, was not promoted until June 1, 1997. Skelton avers that she made numerous complaints about the disparity between MSII's treatment of her and its treatment of its equivalent male employees; that she was subsequently terminated because of those complaints; that, unlike male recruits who were allowed to retain stock in MSIH ("British stock") upon their termination, she was not allowed to retain her British stock when she was terminated; and that the person who assumed her duties and responsibilities upon her termination was a less experienced male. Skelton filed her Title VII gender discrimination and retaliation claims as a result of the above-mentioned conduct.
B. MSII's Alleged Securities Fraud Violations, Breach of Contract, and Conversion
Skelton entered into an Executive Stock Option Plan ("ESOP"), by which she was granted an option on 25,000 shares of Class B non-voting MSII stock. Skelton asserts that, in entering into the ESOP, she relied on misrepresentations she claims were made by MSII. Specifically, Skelton contends that MSII represented: 1) it was "going public", 2) as a result, its shares could soon be converted to MSIH shares at a 5-1 exchange ratio, and 3) the infusion of capital into MSII from outside investors would increase the value of Skelton's shares and option. Skelton avers that none of these things happened and that MSII omitted to tell her that they would not occur.
The ESOP provided that: 1) the options were exercisable in the second through the fifth year of the grant, 2) any unexercised options would expire within 15 days after the termination of employment for any reason other than death or Good Cause ("expiration provision"), and 3) as to exercised options, upon an employee's termination for any reason whatsoever or upon an employee's death, MSII would have eighteen months to elect to buy back the stock of the employee at the current market price or the price at which the employee had purchased the stock, whichever was less ("call provision"). Skelton also contends that: 1) when she was terminated, she communicated to MSII her desire to exercise her option, 2) MSII advised Skelton that, if she exercised her option, it would buy the stock back and refund her the money she paid to purchase the MSII shares, such that she would receive no benefit from exercising the option, 3) MSII failed to advise her that the expiration and call provisions did not apply to Skelton under the circumstances by which she was terminated, 4) relying on these misrepresentations and/or omissions, Skelton did not exercise her option, and 5) MSII's shares were subsequently converted into shares of another company at a value greater than the price at which Skelton would have bought the shares had she exercised her option, such that MSII essentially deprived Skelton of an earned employment benefit.
These allegations form the basis of Skelton's securities fraud, breach of contract and conversion claims.
II. Summary Judgment Standard
Under Rule 56(c) of the Federal Rules of Civil Procedure, summary judgment is appropriate when the pleadings and record evidence show that no genuine issue of material fact exists and that, as a matter of law, the movant is entitled to judgment. Little v. Liquid Air Corp., 37 F.3d 1069, 1075 (5th Cir. 1994). A material fact is one that "might affect the outcome of the suit under the governing law" and a "dispute about a material fact is `genuine' . . . if the evidence is such that a reasonable jury could return a verdict for the nonmoving party." Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986).
In a motion for summary judgment, the burden is on the movant to prove that no genuine issue of material fact exists, and if the movant fails to meet its burden, the motion must be denied, regardless of the nonmovant's response. Little, 37 F.3d at 1075. If, however, the movant does meet its burden, then the nonmovant must go beyond the pleadings and "designate specific facts showing that there is a genuine issue for trial." Id. The record before the court must be considered in the light most favorable to the nonmovant. Harrison v. Byrd, 765 F.2d 501, 504 (5th Cir. 1985).
III. Analysis
A. MSII's Alleged Gender Discrimination
In order to sustain her discrimination claim, Skelton had to file it with the Equal Employment Opportunity Commission ("E.E.O.C.") no later than 300 days "after the alleged unlawful employment practice occurred." 42 U.S.C.A. § 2000e-5. However, the Fifth Circuit has carved out an "equitable exception" to this rule when there is a "continuing violation" rather than a series of discrete acts. Waltman v. International Paper Co., 875 F.2d 468, 474 (5th Cir. 1989). The essence of the continuing violation theory is that:
[E]quitable considerations may very well require that the filing periods not begin to run until facts supportive of a Title VII charge or civil rights action are or should be apparent to a reasonably prudent person similarly situated. The focus is on what event, in fairness and logic, should have alerted the average lay person to act to protect [her] rights.Webb v. Cardiothoracic Surgery Ass'n., 139 F.3d 532, 537 (5th Cir. 1998) (citing Glass v. Petro-Tex. Chem. Corp., 757 F.2d 1554, 1560-61 (5th Cir. 1985)). The court in Webb affirmed the district court's grant of summary judgment for the defendant because the claim was untimely, noting that the plaintiff "was aware and knew of facts in February of 1993 that were supportive of a Title VII charge of an unlawful employment practice," but did not report such practice to the E.E.O.C. until July 1995. Id. at 537-38. In rejecting the continuing violation theory, the Webb court focused on the third of three factors by which courts are to determine whether a continuing violation exists, as set out in Berry v. Board of Supervisors of La. St. Univ., 715 F.2d 971, 981 (5th Cir. 1983): 1) whether the alleged acts involve the same type of discrimination, tending to connect them in a continuing violation, 2) whether the plaintiff was subjected to recurring acts of discrimination, and 3) a) whether the permanence of the act should have "triggered an employee's awareness and duty to assert her rights," and b) whether the consequences of the act continue absent an intent to discriminate. Id. at 538. The court in Berry similarly noted the elevated importance of the third factor. Berry, 715 F.2d at 981.
It is undisputed that Skelton filed her gender discrimination complaint with the E.E.O.C. in November 1997. The evidence reveals that more than 300 days earlier, in January 1996, Skelton concluded that MSII was discriminating against her on the basis of her gender. Although Skelton alleges that MSII explained the pay and promotion disparity between her and her male colleagues by stating that her department was a "cost center" and that this explanation misled her by concealing MSII's discriminatory intent, such that the time to file her E.E.O.C. complaint should be tolled, her argument is unpersuasive. There is no evidence that Skelton was misled by MSII's explanation. If fact, the evidence shows that Skelton was dissatisfied with MSII's explanation and that she clearly felt MSII was discriminating against her as of January 1996. The Court thus finds, as a matter of law, that Skelton was aware of facts in January 1996 that were supportive of a Title VII gender discrimination charge, but she did not make a complaint to the E.E.O.C. until more than 300 days later, in November 1997. The Court thus concludes that the "continuing violation" exception does not apply here and the filing of Skelton's E.E.O.C. complaint, therefore, does not satisfy the 300 day limitation of 42 U.S.C.A. § 2000e-5. The discrimination charge is, therefore, untimely, and must be dismissed.
B. MSII's Alleged Retaliation
In Title VII retaliation cases, the Fifth Circuit has adopted the burden-shifting structure set out by the United States Supreme Court in Title VII disparate treatment cases. Long v. Eastfield College, 88 F.3d 300, 304 (5th Cir. 1996) (adopting the test articulated in McDonnell Douglas Corp. v. Green, 411 U.S. 792, 802-04 (1973)). Under this structure, the plaintiff must first prove a prima facie case of retaliation by a preponderance of the evidence. Garrett v. Constar Inc., No. Civ.A. 3:97-CV-2575, 1999 WL 354239, at *3 (N.D. Tex. May 25, 1999) (citing Tex. Dep't. of Community Affairs v. Burdine, 450 U.S. 248, 252-53 (1981)). In order to do so, the plaintiff must prove: 1) she engaged in activity protected by Title VII, 2) an adverse employment action occurred, and 3) a causal link exists between the protected activity and the adverse employment action. Long, 88 F.3d at 304. Should the plaintiff make out her prima facie case, the burden of production shifts to the defendant to articulate a legitimate, non-retaliatory reason for the adverse employment action. Id. at 304-05. If the defendant introduces evidence which, if true, would permit the conclusion that the adverse employment action was non-retaliatory, the plaintiff must prove, by a preponderance of the evidence, either that 1) the non-retaliatory reason offered by the defendant is really just a pretext for retaliation or, since the burden of persuasion on the ultimate issue of retaliation remains with the plaintiff at all times, 2) the adverse employment action would not have occurred "but-for" the protected activity. See Burdine, 450 U.S. at 256; see also Long, 88 F.3d at 305 n. 4.
Skelton contends that MSII retaliated against her, in violation of Title VII, by terminating her and by refusing to allow her to retain her British stock.
1. Skelton's Termination
The record establishes that Skelton complained to Robinson numerous times about the disparity between her position and salary and those of her male colleagues, but the record contains no evidence that she made any complaints after June 1997, when she was promoted to Vice President. The summary judgment evidence also establishes that: 1) In July 1997, Skelton started reporting to John Schickling ("Schickling"), the Chief Financial Officer for MSI plc and the person appointed to succeed Robinson in overseeing the Human Resources and Finance departments of MSII, 2) it was Schickling, and not Robinson, who made the decision to eliminate Skelton's position, and, therefore, terminate Skelton, 3) Robinson's sole involvement in this decision was to confirm, in response to Schickling's question, that Frank Henson, the Director of Human Resources ("DHR"), who was earning significantly less than Skelton, could capably manage the department, 4) when Schickling identified Skelton's position for possible elimination, he knew nothing about her past discrimination complaints to Robinson, 5) Skelton subsequently became aware that her position was in jeopardy, and 6) Schickling learned of Skelton's discrimination complaints shortly before her position was finally terminated, when she communicated to him, via e-mail, her view that she had been the victim of past pay and promotion disparities, and she stated she would be disappointed if the company terminated her, the company's only female Vice President, after she had served only three months in that position.
The record establishes that Skelton has made out a prima facie case of retaliation as to her termination. She engaged in protected activity, in that she complained of gender discrimination to Robinson and then to Schickling, and MSII thereafter took an adverse employment action against her by terminating her. Long, 88 F.3d at 305-06. As to the causal connection between the protected activity and the adverse employment action, the Fifth Circuit has held that "the evidence must show that the employer's decision to terminate was based in part on knowledge of the employee's protected activity." Sherrod v. American Airlines, Inc., 132 F.3d 1112, 1122 (5th Cir, 1998). Although Schickling had identified Skelton as a "prime candidate for layoff" before he knew anything about her discrimination complaints, it is undisputed that the final decision to terminate Skelton was not finalized until after Schickling received Skelton's e-mail revealing her past discrimination and, therefore, the decision to terminate Skelton could have been based on such complaints.
The Fifth Circuit has emphasized that the standard of proof applicable to the "causal link" prong of the prima facie test is much less stringent than is the "but-for" test applicable to the ultimate question of whether the defendant unlawfully retaliated against the plaintiff. Long, 88 F.3d at 305 n. 4. In fact, as the Fifth Circuit has noted, "[c]lose timing between an employee's protected activity and an adverse action against [her] may provide the `causal connection' required to make out a prima facie case of retaliation." Swanson v. General Servs. Admin., 110 F.3d 1180, 1188 (5th Cir. 1997) (citing Armstrong v. City of Dallas, 997 F.2d 62, 67 (5th Cir. 1993)). Although "the mere fact that some adverse action is taken after an employee engages in some protected activity will not always be enough for a prima facie case," ( Swanson, 110 F.3d at 1188, n. 3), a time lapse of up to four months has been found sufficient to satisfy the causal connection for summary judgment purposes. Garrett v. Constar Inc., No. Civ.A. 3:97-CV-2575, 1999 WL 354239, at *5 (N.D. Tex. May 25, 1999). In the instant case, the evidence reveals that Skelton repeatedly complained of gender discrimination at least until her promotion in June 1997. She was terminated four months later. In the Court's view, those facts, considered in light of all the other undisputed facts, demonstrate the causal connection required to show a prima facie case.
The burden thus shifts to MSII to articulate a non-retaliatory reason for Skelton's termination. To do so, MSII must offer evidence that, if believed, would permit the trier of fact to conclude that the termination was non-retaliatory. Long, 88 F.3d at 308. In this case, it has done so.
MSII has offered evidence that MSI plc directed each of its subsidiaries to reduce their budgets and, in response to this directive, Schickling reviewed the operations of MSII's Finance and Human Resources departments and decided to eliminate Skelton's position because, due in large part to the restructuring of the Mobile Systems group, Skelton's position would essentially duplicate the functions of the DHR position, and at a significantly higher salary. In the Court's view, this explanation satisfies MSII's burden of production of a legitimate non-retaliatory reason, such that the Court is obligated to decide whether Skelton can show, by a preponderance of the evidence, that MSII's articulated reason is only a pretext for retaliation or that MSII would not have terminated her "but-for" her gender discrimination complaints.
As did the court in Long, this Court focuses its analysis on the "but-for" test instead of a pretext analysis. The terms have been used interchangeably in several cases. See, e.g., Sherrod v. American Airlines, Inc., 132 F.3d 1112, 1122-23 (5th Cir. 1998); Shackelford v. Deloitte Touche, L.L.P., 190 F.3d 398, 407 (5th Cir. 1999).
In order to withstand MSII's Motion for Summary Judgment, Skelton must show a "conflict in substantial evidence" by which the trier of fact could find that she would not have been terminated but for her sex discrimination complaint. Id. (citing Rhodes v. Guiberson Oil Tools, 75 F.3d 989, 993 (5th Cir. 1996) (quoting Boeing Co. v. Shipman, 411 F.2d 365, 375 (5th Cir. 1969))). She has not done so. The only evidence to which Skelton has pointed on this "but-for" issue is her deposition testimony that she was told by an unidentified person at an unstated time that she was terminated because she "pushed for party." However, such evidence is hearsay, and therefore inadmissible. FED. R. EVID. 801(c). Furthermore, Skelton has in no way demonstrated that this alleged statement fits any exception to the rule that hearsay is inadmissible. See generally Goodwin v. Johnson, 132 F.3d 162, 186 (5th Cir. 1998). The statement is, therefore, incompetent summary judgment evidence. Id. Since this is the only evidence that Skelton has introduced regarding the "but-for" test, the Court finds, as a matter of law, that Plaintiff has not satisfied the requisite "but-for" link.
2. The British Stock
The Court finds that disputed fact issues exist on whether MSII retaliated against Skelton by not allowing her to retain her British stock. Specifically, given Schickling's role in connection with the termination of Skelton, the Court finds that disputed issues remain as to whether Schickling was acting solely in his capacity as CFO of MSI plc, and not on behalf of MSII, when he made decisions regarding Skelton's British stock, and as to whether MSII would not have refused to allow Skelton to retain her British stock but for her discrimination complaints. As such, summary judgment is denied on the issue of whether MSII retaliated against Skelton by refusing to allow her to retain her British stock.
To the extent that Skelton intends to state a separate claim for discrimination arising from the terms of her severance, such claim survives summary judgment.
C. MSII's Alleged Securities Fraud Violations
Skelton alleges that MSII has committed securities fraud violations under federal and state law. As noted above ( see supra n. 1), Skelton has withdrawn her 15 U.S.C.A. § 78q(a) claim and now sues, as to the alleged violations of federal law, exclusively under Rule 10b-5. To succeed on her Rule 10b-5 claims, Skelton "[M]ust allege, at a minimum, that [MSII] made (1) a false misrepresentation or omission, (2) of a material fact, (3) knowing its falsity and intending that [Skelton] rely on it, (4) that [Skelton] justifiably relied on the misrepresentation or omission, and (5) suffered damage resulting from this reliance." Oppenheimer v. Prudential Securities Inc., 94 F.3d 189, 194 (5th Cir. 1996) (citing Shores v. Sklar, 647 F.2d 462, 468 (5th Cir. 1981)).
Texas law provides that a person "who offers or sells a security . . . [or] offers to buy or buys a security . . . by means of an untrue statement of material fact or an omission to state a material fact necessary in order to make the statements made . . . is liable . . ." TEX. REV. Civ. STAT, art. 581-33 §§ A(2)-B. Furthermore, under TEX. BUS. COMM. CODE ANN. § 27.01, where "the alleged fraud is premised upon a false promise, it must be shown that the promise was material; was made with the intention of not fulfilling it; was made to one with the purpose of inducing [her] to enter into a contract; and was relied upon by the person entering the contract." National Resort Communities, Inc. v. Holleman, 594 S.W.2d 195, 196 (Tex.Civ.App.-Austin 1980, writ ref'd n.r.e.).
Skelton alleges two basic sets of misrepresentations and omissions: 1) those by which she entered into the ESOP agreement, and 2) those by which she decided not to exercise her MSII option. As to the first set, Skelton specifically asserts that MSII represented: 1) it was "going public"; 2) as a result, its shares could soon be converted to MSIH shares at a 5-1 exchange ratio, and 3) the infusion of capital into MSII from outside investors would increase the value of Skelton's shares and options. Skelton contends that these were all misrepresentations and that MSII omitted to tell her that they would not occur. The Court finds that disputed fact issues exist as to this claim and, as such, summary judgment is denied.
As to the second set of omissions and/or misrepresentations, the record establishes that, when Skelton was terminated, MSII informed her that any shares she purchased upon exercise of her option would be repurchased at her cost. Skelton asserts that even though this was permitted by the terms of the ESOP, it was not permitted by Texas law and, thus, MSII should have either told her about the Texas law and/or not put the allegedly unlawful provision in the ESOP. Skelton avers that she relied on these allegedly illegal representations and/or omissions when she decided not to exercise her MSII option.
Specifically, Skelton avers that Texas law prohibits MSII from forfeiting her option because the option had vested and she was terminated from her employment without cause and through no fault of her own. In support of this contention, Skelton cites Coleman v. Graybar Elec. Co., 195 F.2d 374, 377-78 (5th Cir. 1952). The plaintiff in Coleman was an appliance salesman for Graybar Electric Company, Inc. Id. at 375. He entered into a compensation plan with Graybar by which he was to receive certain bonuses, commissions and other compensation provided that he "remain in the service of [Graybar] until and including the first of April following the year for which the compensation hereunder is payable . . ." Id. at 376 (quoting a provision of the compensation plan). However, Graybar terminated the plaintiff forty-four days before his compensation became payable. Id. at 375. The compensation plan further provided that if the plaintiff "` leaves or ceases to be in the employ of [Graybar]' the drawing account shall be a full discharge of [Graybar's] obligation respecting compensation . . ." Id. at 376-77 (quoting a provision of the compensation plan) (emphasis added). The Coleman court refused to construe that provision to mean that Graybar could arbitrarily terminate plaintiff, without cause, to avoid its obligations under the compensation plan, even though plaintiff's employment application stated that Graybar could terminate the plaintiff's employment at its discretion and at any time. Id. at 377. In so holding, the court stated that if the parties intended that Graybar could terminate the plaintiff solely at its discretion such that plaintiff could not recover under the compensation plan, that understanding should have been stated in the compensation plan "in terms so clear as to remove any valid ground for construction." Id. Because the compensation plan in that case did not so provide, the court in Coleman concluded that the plan "did not authorize a forfeiture of additional compensation provided in the plan." Id. at 378. However, the court also noted that its holding would not apply when a forfeiture of bonus provision expressly states "that the bonus should be forfeited in the event the employee was discharged `for any cause whatsoever within the sol[e] judgment of the company', or [when] . . . the payment, [and not the discharge], was at the discretion of the company , or [when the forfeiture provision] . . . reserv[ed] the right of termination of services `for cause or otherwise.'" Id.
In this case, the evidence reveals that the call provision of the ESOP applies "[i]n the event that an employee's employment with [MSII] is terminated for any reason whatsoever . . ." (emphasis added). Similarly, the expiration provision of the ESOP applies "[i]n the event of the termination of employment for any reason other than death or Good Cause . . ." (emphasis added). Unlike the language of the compensation plan in Coleman, this language leaves no doubt as to MSII's intentions. As such, this Court holds that Coleman does not apply here and, therefore, the terms of the ESOP operate legally under the circumstances of Skelton's termination. Thus, as a matter of law, Skelton's federal and state securities fraud claims, as to the alleged misrepresentations and omissions by which Skelton decided not to exercise her MSII option, fail.
D. MSII's Alleged Breach of Contract and Conversion
Skelton contends that, pursuant to Coleman and under the circumstances of her termination, MSII could not legally repurchase her shares at cost, as the ESOP provided, and thus breached its contract with her when it threatened to do so. She further asserts that because MSII could not legally exercise the provisions of the ESOP to repurchase her shares, MSII's threat to do so if the option was exercised interfered with her use of her option such that it constituted an unlawful conversion of Skelton's property. However, since Coleman does not control this case, this Court finds, as a matter of law, that Skelton's breach of contract and conversion claims also fail.
IV. Conclusion
For the reasons stated above, Plaintiff's Motion for Partial Summary Judgment is DENIED and Defendant's Motion for Summary Judgment is GRANTED IN PART and DENIED IN PART. Plaintiff's claims for securities fraud violations, breach of contract and conversion, all related to misrepresentations and/or omissions as a result of which Plaintiff allegedly decided not to exercise her option, are DISMISSED WITH PREJUDICE. Plaintiff's claims for gender discrimination, as to the alleged disparity in pay and promotion between Plaintiff and her male colleagues, and retaliation, as to her termination, are likewise DISMISSED WITH PREJUDICE. Defendant's Motion for Summary Judgment on Plaintiff's claims that 1) MSII retaliated and/or discriminated against Plaintiff by refusing to allow her to retain her British stock, and 2) MSII violated state and federal securities laws, in connection with Plaintiff's entry into the ESOP, is DENIED.
The Court further ORDERS that Defendant's Motion to Strike is rendered moot because it related to a potential Plaintiff's witness who would testify, if allowed, as to the securities fraud claims which have been dismissed herein.
SO ORDERED.