Opinions of the United 1996 Decisions States Court of Appeals for the Third Circuit
5-2-1996
Kowalski v. L&F Products Precedential or Non-Precedential:
Docket 95-5101
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Recommended Citation "Kowalski v. L&F Products" (1996). 1996 Decisions. Paper 167. http://digitalcommons.law.villanova.edu/thirdcircuit_1996/167
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___________
No. 95-5101 ___________
TERESA KOWALSKI
Appellant,
vs.
L & F PRODUCTS
Appellee.
APPEAL FROM THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF NEW JERSEY
(D.C. Civil No. 94-cv-00448)
ARGUED DECEMBER 11, 1995
BEFORE: BECKER, ROTH and LEWIS, Circuit Judges.
(Filed May 2, 1996)
Timothy P. McKeown (ARGUED) Schachter, Trombadore, Offen, Stanton & Pavics 45 East High Street Post Office Box 520 Somerville, NJ 08876-2394
Attorney for Appellant
1 2 Richard C. Cooper (ARGUED) McCarter & English 100 Mulberry Street Four Gateway Center Newark, NJ 07101-0652
Attorney for Appellee
OPINION OF THE COURT ___________
LEWIS, Circuit Judge. In this appeal, we must address the scope of § 510 of
the Employment Retirement Income & Security Act ("ERISA") to
determine whether appellant-employee Teresa Kowalski ("Kowalski")
stands protected from her employer's alleged retaliatory
discharge. Kowalski argues that the district court incorrectly
granted summary judgment in favor of appellee-employer L & F
Products ("L & F"). Kowalski has alleged that L & F terminated
her for exercising her right to receive certain disability
benefits.
We hold that Kowalski has raised a cognizable cause of
action under § 510 for retaliatory termination notwithstanding
the fact that she had received her benefits prior to being
terminated. In addition, for the reasons set forth in section
III of this opinion, we will vacate the district court's grant of
summary judgment in favor of L & F.
I.
L & F employed Teresa Kowalski as a packaging operator
from April 23, 1984 until January 29, 1993. Kowalski's duties as
3 a packaging operator required her to spend the entirety of her
eight and a half hour shift on her feet. In June 1991, Kowalski
informed L & F's company nurse that she had developed bunions on
each foot. On the advice of her doctor, Kowalski decided to
undergo separate operations1 to remove each bunion. Between
June 7, 1991 and October 21, 1991, Kowalski took a medical leave
of absence for the first bunionectomy and received full medical
benefits under L & F's Short Term Disability Plan (the "Plan").
Thereafter, Kowalski returned to work. Almost a year later, she
took another leave of absence for the second bunionectomy and
again received full medical benefits under the Plan.
During Kowalski's second leave of absence, L & F's
human resource manager, Rob King, hired a private investigator to
determine whether Kowalski was actually disabled and entitled to
the benefits she was receiving. The investigator produced a
report to King stating that Kowalski had been "clean[ing]
professional offices" during her medical leave of absence. App.
at 74-75. Relying on this report, L & F fired Kowalski on
January 29, 1993. App. at 74.
In his deposition, King testified that he relied
heavily on the investigator's summary of written statements made
by two "witnesses," Diane Laich and Dr. Lapkin, both of which
suggested only that Kowalski had contracted to provide cleaning
services during the period of her disability. The investigator
prepared a written synopsis of Laich's and Dr. Lapkin's
1 This operation is called a "bunionectomy."
4 statements, which summarily concluded that Kowalski was engaged
in the performance of cleaning services during the period of her
medical leave.
Neither Laich nor Dr. Lapkin testified or stated that
they ever saw Kowalski performing cleaning services. Laich, in a
certified statement to the district court, stated that Kowalski
had contracted to provide cleaning services for a local church.
App. at 50. Laich also stated that she was aware that Kowalski's
son and another woman were providing cleaning services at the
church. King admitted that he never compared the investigator's
synopsis of Laich's and Dr. Lapkin's written statements to their
actual statements prior to terminating Kowalski. App. at 73-75.
Despite his own testimony that it is important to
consider an employee's version of events before deciding to
terminate that employee, King refused to consider Kowalski's
responses to the investigator's conclusions. In particular,
Kowalski had informed King that she owned a cleaning service, but
did not engage in providing cleaning services herself during the
period of her disability.2 Nevertheless, King did not allow
Kowalski the opportunity to provide any evidence to support her
claim.
Kowalski filed this lawsuit alleging that her discharge
violated § 510 of ERISA. The district court granted L & F's
motion for summary judgment on the grounds that (1) Kowalski
2 King testified that it is not against L & F company policy for an employee who owns his or her own business to receive disability payments. App. at 77.
5 failed to show that L & F's legitimate nondiscriminatory reason
for termination was pretextual; and (2) Kowalski failed to offer
any evidence of L & F's intention to retaliate against her for
exercising her right to medical leave benefits.
II.
As a threshold matter, we must determine whether
Kowalski, as a plaintiff suing under § 510 of ERISA, has a
cognizable cause of action notwithstanding the fact that she
received her ERISA-protected benefits from her employer prior to
termination. Our review of this issue of law is plenary. Gavalik
v. Continental Can Co., 812 F.2d 834, 850 (3d Cir. 1987).
Section 510 of ERISA provides that: It shall be unlawful for any person to discharge, fine, suspend, expel, discipline, or discriminate against a participant or beneficiary for exercising any right to which he is entitled under the provisions of an employee benefit plan, . . . or for the purpose of interfering with the attainment of any right to which such participant may become entitled under the plan.
29 U.S.C. § 1140. Thus, the plain language of § 510 provides a cause of
action for employees who have been discharged "for exercising any
right" to which employees are entitled to under an ERISA-
protected benefit plan. But section 510 also goes further,
protecting employees from interference with the "attainment of
any right to which [the employees] may become entitled." We have
recognized that Congress enacted § 510 primarily to prevent
employers from discharging or harassing their employees in order
6 to keep them from obtaining ERISA-protected benefits. Gavalik,
812 F.2d at 851.
L & F argues that, because Kowalski had received all of
her benefits prior to termination, her claim must fail. In
particular, L & F argues that Congress enacted § 510 to prevent
companies from avoiding their ERISA obligations and that a
plaintiff who has received the benefits flowing from an
employer's ERISA obligations is not entitled to protection under
the statute.
Although few courts have addressed whether a plaintiff-
employee has a cognizable ERISA cause of action where the
plaintiff received his or her ERISA-protected benefits prior to
termination, at least one Court of Appeals has indicated a
willingness to recognize such a cause of action. In Kimbro v.
Atlantic Richfield Co., 889 F.2d 869 (9th Cir. 1989), the
plaintiff claimed that he was unlawfully discharged because he
had used his sick leave benefits. The Ninth Circuit ultimately
determined that the plaintiff in Kimbro failed to establish a
prima facie case; however, it also recognized a potential cause
of action for "unfair reprisal for use of ERISA-protected
benefits." Id. at 881; see also Bailey v. Policy Management
Systems Corp., 814 F. Supp. 37, 39 (N.D. Ill. 1992) (recognizing
that a plaintiff who alleged that she was terminated for
submitting approximately $40,000 in claims to her employer stated
a claim under § 510 of ERISA).
7 Given the peculiar factual posture of this case and
others like it, the dearth of case law directly on point is
understandable. The district court recognized that: It seems anomalous for an employer to pay all the benefits due an employee and then immediately terminate the employment relationship. Once an employer has made the investment in its employee by providing medical disability benefits, it seems only logical that the employer would hope the employee would return to work. To terminate an employee days after receiving full benefits is illogical (emphasis in original).
Dist. Ct. Op. at 12. Nonetheless, whether it is or is not
logical for an employer to act a particular way is largely
irrelevant for purposes of discerning whether Congress intended
to protect employees from that particular type of employer
behavior.
It is hard to imagine any rational construction of the
"for exercising any right" language in § 510 that would indicate
that Congress intended that the protections provided to employees
by § 510 would not extend to the type of retaliatory discharge
that is alleged in this case. There is simply no limiting
language in § 510 that suggests that only future benefits are
protected. We are bound to recognize and effectuate Congress'
intent where it is clear from the language of a statute. See
Connecticut Nat. Bank v. Germain, 503 U.S. 249, 253-54 (1992)
(courts must presume that "a legislature says in a statute what
it means and means in a statute what it says there"); Moskal v.
United States, 498 U.S. 103, 109-110 (1990) (courts have a duty
8 to "give effect, if possible, to every clause and word of a
statute").
At oral argument, counsel for L & F argued that the "to
which he is entitled" language that follows "for exercising any
right" in § 510 is the limiting language which supports the
company's suggested reading of § 510. This argument ignores the
plain language of § 510, and implies that Congress intended "to
which he is entitled" to actually mean only "to which he is
entitled to receive in the future." If we were to read § 510 in
this manner, it would render the remainder of the section, which
prohibits employer interference "with the attainment of any right
to which [the employee] may become entitled under the plan[],"
superfluous. The Supreme Court has commented that its cases
"express a deep reluctance to interpret a statutory provision so
as to render superfluous other provisions in the same enactment."
Pa. Department of Public Welfare v. Davenport, 495 U.S. 552, 562
(1990). We, of course, share this reluctance and reject L & F's
suggested reading of § 510.
If we were to accept L & F's assertion that § 510 only
protects individuals with an expectation of future benefits,
employers would be free to pay ERISA benefits to an employee and
then discharge the employee for having exercised his or her
rights to the benefits. L & F's suggested reading of § 510 would
allow an employer to force an employee to choose between losing
his or her job for exercising his or her right to ERISA-protected
benefits or keeping his or her job by forgoing his or her right
to the benefits, a quintessential Hobson's choice. Reading § 510
9 to permit this type of behavior by employers would likely result
in many employees forgoing their rights to ERISA-protected
benefits, which, in turn, would frustrate the purposes behind
Congress' enactment of ERISA.
It may be true that, in practice, few employers would
terminate an employee after paying the employee his or her ERISA-
protected benefits. But it is not hard to imagine several
situations in which an employer would have a motivation to embark
upon such a course of action. For example, an employer might
decide to terminate an employee for exercising rights to ERISA-
protected benefits, after having paid the benefits, to deter
other employees from exercising their rights to similar benefits.
Likewise, an employer who had been searching for a reason to
terminate a particular employee might be motivated to pay the
benefits to the employee before termination to camouflage a
pretextual firing. On a less vindictive level, an employer may,
for reasons of oversight or laziness, simply not get around to
terminating an employee until after paying the benefits. We
recognize that employees facing these types of situations are no
less vulnerable than those who are terminated without receiving
their ERISA-protected benefits, and therefore conclude that § 510
protects employees from being terminated for exercising rights to
ERISA-protected benefits regardless of whether they have received
such benefits prior to termination.
Accordingly, we hold that § 510 of ERISA can provide an
employee with a cause of action to challenge an employer's
termination when the termination has allegedly occurred in
10 retaliation for the employee exercising his or her right to
receive ERISA-protected benefits.
III.
Our review of the district court's granting of L & F's
motion for summary judgment is plenary. Turner v. Schering-
Plough Corp., 901 F.2d 335, 340 (3d Cir. 1990). To determine
whether the district court properly granted summary judgment, we
use the same standards employed by the district court. Jefferson
Bank v. Progressive Casualty Insurance Co., 965 F.2d 1274, 1278
(3d Cir. 1992). Rule 56(c) sets forth the standard for summary
judgment, providing that summary judgment shall be granted only
if there exists "no genuine issue of material fact." Thus, a
factual issue must be both material and genuine in order to
defeat a motion for summary judgment. To be material, the
factual dispute must be one that might "affect the outcome of the
suit under governing law." Anderson v. Liberty Lobby, Inc., 477
U.S. 242, 248 (1986). Of course, in making our determination of
whether the district court properly granted summary judgment, we
must draw all reasonable inferences in favor of the non-movant.
Meyer v. Riegel Prods. Corp., 720 F.2d 303, 307 n.2 (3d Cir.
1983).
11 A. Burdens of Proof
We have held that the presumptions and shifting burdens
of production used in employment discrimination cases are equally
applicable in the context of discriminatory discharge cases
brought under § 510 of ERISA. Turner v. Schering-Plough Corp.,
901 F.2d 335, 346 (3d Cir. 1990). The evidentiary playing field
for discrimination cases has been drawn clearly by McDonnell
Douglas Corp. v. Green, 411 U.S. 792 (1973) and its progeny.
Accordingly, a plaintiff must first establish a prima facie case
of a discriminatory discharge. If the plaintiff satisfies this
requirement, the defendant must articulate a legitimate, non-
discriminatory reason for the discharge. To survive summary
judgment when the defendant articulates a legitimate, non-
discriminatory reason for the discharge, the plaintiff must point
to some evidence, direct or circumstantial, from which a
factfinder could either (1) disbelieve the employer's articulated
legitimate reasons; or (2) believe that an individual's
discriminatory reason was more likely than not reason for the
discharge. Fuentes, 32 F.3d at 764 (citing St. Mary's Honor
Center v. Hicks, 113 S. Ct. 2742, 2749 (1993)). B. L & F's Proffered Non-Discriminatory Reason for the Discharge
The district court found that Kowalski established a
prima facie case of unlawful termination under ERISA, and L & F
does not dispute this finding. To dispel the inference of a
retaliatory discharge, L & F must articulate a legitimate, non-
discriminatory reason for discharging Kowalski. We have
12 characterized this burden as "relatively light." Fuentes v.
Perskie, 32 F.3d 759, 763 (3d Cir. 1994). L & F can satisfy this
burden of production by introducing evidence which, taken as
true, would permit the conclusion that there was a non-
discriminatory reason for the discharge. Id. at 763.
The district court correctly concluded that the record
supports L & F's assertion that it discharged Kowalski because it
believed that she had acted fraudulently in procuring and/or
prolonging her disability leave. It is clear from the record
that L & F's human resource manager, Rob King, relied on a
private investigator's report that stated that Kowalski had been
working full-time while on medical disability leave. L & F has
articulated that its actions were motivated by its discovery of
Kowalski's alleged fraud. L & F's proffer of this legitimate,
non-discriminatory reason for terminating Kowalski satisfies the
"light" burden we have set forth in Fuentes.
C. Kowalski's Evidence of Pretext
Given that L & F was able to proffer a legitimate non-
discriminatory reason for terminating Kowalski, to avoid summary
judgment, Kowalski must point to evidence from which the court
could reasonably infer that L & F's proffered reasons were
fabricated (i.e., pretextual). Fuentes, 32 F.3d at 764. We
noted that meeting this burden requires the plaintiff to put
forth evidence demonstrating that the employer's proffered non-
discriminatory reason "was either a post hoc fabrication or
otherwise did not actually motivate the employment action (that
is, the proffered reason is a pretext)." Id.
13 At a minimum, Kowalski must put forward enough evidence
to create a genuine issue of material fact as to whether L & F's
proffered reasons for the discharge were pretextual. To do this,
Kowalski must "demonstrate such weaknesses, implausibilities,
inconsistencies, incoherences, or contradictions in the
employer's proffered legitimate reasons for its action that a
reasonable fact finder could rationally find them unworthy of
credence, and hence infer that the employer did not act for [the
asserted] non-discriminatory reasons." Id. at 765.
The district court held that "there is nothing [in the
record that] creates a genuine issue of fact that defendant's
reason for terminating plaintiff is pretextual." Dist. Ct. Op.
at 10. The court correctly observed that, "even if defendant
wrongly believed plaintiff acted fraudulently in procuring her
disability leave, if defendant acted upon such a belief it cannot
be held guilty of retaliatory discharge." Id. at 11. The
district court concluded that "[p]laintiff has offered no
evidence to suggest that defendant acted in bad faith when
relying upon the investigator's report." Id.
Kowalski argues that the evidence contradicts the
defendant's proffered reason and demonstrates the existence of
material issues of fact as to the defendant's good faith in
relying on the results of the investigation to conclude that
Kowalski was working while on disability. We agree. The
district court was too quick to conclude that the accuracy of the
private investigator's report was irrelevant. The facial
accuracy and reliability of the report is probative of whether
14 L & F acted in good faith reliance upon the report's conclusions:
the less reliable the report may appear, the greater the
likelihood that King's reliance on it to justify his actions was
pretextual.
A review of the circumstances surrounding the
preparation of the investigator's report reveals that King should
have cast a wary eye toward its factual conclusions. The
investigator never observed Kowalski working at her "full-time
cleaning job," despite the fact that he conducted three days of
surveillance. In addition, the report only contained the
investigator's summary of two witnesses' statements and not the
witnesses' actual statements. The investigator's report also
indicated that Kowalski had actually performed cleaning services
while on medical leave, despite the fact that neither of the
witnesses stated that they actually saw Kowalski perform the
services.
Though not determinative, it is also relevant that L &
F never offered the report into evidence. If the report itself
justified King's good faith reliance, presumably L & F would have
attached it to its summary judgment motion. In fact, in its
brief, L & F states "[p]erhaps the report was inaccurate;
nevertheless, it was the basis for the adverse action as the
decision maker took it to be accurate." L & F Br. at 16. Given
that L & F's termination of Kowalski was admittedly based
entirely on the report, the facial reliability of the report is
relevant to determining whether King, L & F's human resource
15 manager, actually relied in good faith upon the report's
conclusions in terminating Kowalski.
Kowalski offers other facts to suggest that L & F's
reliance on the conclusions of the report was pretextual, and
that she was actually fired for exercising her right to the
disability benefits. Kowalski argues that the timing of her
discharge (which occurred shortly after she had taken her second
leave of absence) indicates that she was discharged for having
taken two periods of disability instead of one. In addition,
Kowalski claims that L & F had no basis to investigate her
because she had not been on leave longer than is normal for a
bunionectomy. She also points out that L & F previously had no
practice of investigating employees who were on disability for
long periods of time. It is also significant that King's reasons
for procuring the investigator's report have changed over the
course of this litigation. As noted, initially he indicated that
he began investigating Kowalski because she had been out of work
longer than normal for a bunionectomy. App. at 60. At a later
point, King indicated that he ordered the investigation because
he had received a tip that the plaintiff was working while on
disability. App. at 62. Although these facts far from establish
that L & F's proffered reason for discharging Kowalski was
pretextual, when viewed alongside the very serious questions
regarding the reliability of the investigator's report, they do
raise a genuine issue of material fact regarding whether L & F's
proffered reason for terminating Kowalski was pretextual.
16 As such, we will vacate the district court's order
granting summary judgment in favor of L & F, and remand the case
to the district court. Upon remand, we suggest that the district
court order the production of the investigator's report. In
doing so, we emphasize that the ambiguities surrounding the
report's conclusions indicate that a finding that L & F relied in
good faith on the report, without having the report itself in
evidence, is inappropriate in this case at the summary judgment
stage. We do not hold, however, that a defendant must always put
an investigative report (or another piece of evidence) upon which
he or she relies into the record. We simply hold that in this
case, where the contents of the primary piece of evidence upon
which the defendant relies is contradicted by witness testimony
and is not even introduced, summary judgment is inappropriate.
D. Kowalski's Evidence of Intent
As an alternative basis for granting summary judgment
in favor of L & F, the district court determined that Kowalski
failed to offer any evidence of L & F's specific intent to
violate ERISA. Kowalski argues that there were sufficient facts
available to the district court for it to reasonably infer that L
& F acted with a discriminatory intent. We agree. We note that
in this case, we need not and do not determine whether specific
intent is an essential element of a § 510 cause of action
because, whether or not such intent is required, there was
sufficient evidence in the record to satisfy the essential
elements of § 510.
17 The same facts Kowalski offered to show that L & F's
proffered non-discriminatory reason for terminating her was
pretextual can be used to infer L & F's specific intent to
violate ERISA. In St. Mary's Honor Center v. Hicks, the Supreme
Court commented that "[t]he factfinder's disbelief of the reasons
put forward by the defendant (particularly if [the] disbelief is
accompanied by a suspicion of mendacity) may, together with the
elements of the prima facie case, suffice to show intentional
discrimination." 113 S. Ct. at 2749. Indeed, we have similarly
held that, "if the plaintiff has pointed to evidence sufficient
to discredit the defendant's proffered reasons, to survive
summary judgment plaintiff need not also come forward with
additional evidence of discrimination beyond his or her prima
facie case." Fuentes, 32 F.3d at 784. Under this standard,
Kowalski has offered enough evidence, which we specified in
section III-C of this opinion, to survive summary judgment on the
issue of whether L & F's actions demonstrated a specific intent
to violate § 510 of ERISA.
As such, we cannot sustain the district court's
conclusion that Kowalski has offered no evidence of L & F's
specific intent to violation § 510 of ERISA.
18 IV.
In sum, we hold that Kowalski, as an employee who
claims to have been terminated by her employer for having
exercised her right to disability benefits arising out of her two
bunionectomies, raised a cognizable claim under § 510 of ERISA
notwithstanding the fact that she received the benefits from her
employer prior to termination. We vacate the judgment of the
district court on the basis that Kowalski presented enough
evidence to suggest that material issues of fact exist as to
whether L & F's reliance on the investigator's report was
pretextual. Based on the evidence in the record before us (and
in part on what evidence is not before us, i.e., the report),
Kowalski has successfully stood her ground against L & F's motion
for summary judgment.