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Schede v. Anthony & Gordon Construction Co., Inc.

Court of Appeals of Tennessee, Knoxville

April 5, 2018


          August 9, 2017 Session

          Appeal from the Circuit Court for Anderson County No. B5LA0236 Donald Ray Elledge, Judge

         A bookkeeper for two companies was terminated after his employers learned that he had a conviction for money laundering and mail fraud arising out of his previous employment. The employee filed suit, alleging that he was terminated because of his age, in violation of the Tennessee Human Rights Act, and his disability, in violation of the Tennessee Disability Act. The employers moved for summary judgment, asserting that the employee was terminated for poor performance and for not disclosing the prior conviction, that these grounds constituted legitimate, nondiscriminatory grounds for termination, and that the employee could not demonstrate that these grounds were a pretext for unlawful discrimination. The trial court granted summary judgment to the employers, and the employee appeals. Finding that there are genuine issues of material fact as to whether the asserted reasons for Plaintiff's termination are pretextual, we reverse the judgment and remand the case for further proceedings.

         Tenn. R. App. P. 3 Appeal as of Right; Judgment of the Circuit Court Reversed; Case Remanded

          John M. Lawhorn and Richard E. Graves, Knoxville, Tennessee, for the appellant, Warren R. Schede.

          Janet Strevel Hayes and Chris W. McCarty, Knoxville, Tennessee, for the appellees, Anthony & Gordon Construction Co., Inc. and Chameleon Enterprises, Inc.

          Richard H. Dinkins, J., delivered the opinion of the court, in which D. Michael Swiney, C.J., joined. John Wesley McClarty, J., dissenting.



         I. Factual and Procedural History

         Anthony & Gordon Construction, Co., Inc., and Chameleon Enterprise, Inc., (collectively "Defendants") were joint employers of Warren Schede ("Plaintiff"), who worked as a bookkeeper/accountant for one or both Defendants for over seven years.

         On June 5, 2015, Plaintiff underwent a surgical procedure to replace his pacemaker. On July 27, Plaintiff began to experience chest pain and difficulty breathing at work and was transported to a hospital. Defendants asserted that, in the course of attempting to locate Plaintiff's wife, they performed a search of Plaintiff's name and learned that he had been convicted for mail fraud and money laundering committed against one of his former employers, which he had not disclosed at the time of his application for employment with Defendants. Plaintiff returned to work in August, and on September 11, 2015, his employment was terminated.

         On November 9, 2015, Plaintiff filed suit, alleging that he had been terminated because of his age and disability. In response, Defendants denied the allegations and raised several affirmative defenses, including "that Plaintiff's termination was not as a result of discrimination and/or retaliation. . . . [that Plaintiff was terminated] for legitimate, business reasons. . . [and] after discovering prior bad acts he never revealed related to a previous employer." After conducting discovery, Defendants moved for summary judgment, contending that the undisputed material facts showed that Plaintiff was terminated for legitimate, non-discriminatory reasons, i.e., "poor performance and the discovery of [Plaintiff's] prior criminal convictions for mail fraud and money laundering." Plaintiff responded, contending that sufficient evidence existed to support his discrimination claims.

         A hearing on the motion was held on October 17, 2016, at the conclusion of which the court granted the motion; a transcript of the ruling was incorporated into an order entered on October 27, which held that "Defendants set forth legitimate, non-discriminatory, and non-pretextual reasons for terminating the employment of Plaintiff, " and dismissed the case. Plaintiff appeals, articulating the following issue:

Whether the Trial Court misapplied the summary judgment standard by failing to take the strongest legitimate view of the evidence in favor of the Plaintiff, failing to allow all reasonable inferences in favor of the Plaintiff, and failing to discard all countervailing evidence with respect to Plaintiff's discrimination claims?

         II. Standard of Review

         The dispositive issue in this appeal is whether the Trial Court erred in granting summary judgment. As our Supreme Court has instructed:

Summary judgment is appropriate when "the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law." Tenn. R. Civ. P. 56.04. We review a trial court's ruling on a motion for summary judgment de novo, without a presumption of correctness. Bain v. Wells, 936 S.W.2d 618, 622 (Tenn. 1997); see also Abshure v. Methodist Healthcare-Memphis Hosp., 325 S.W.3d 98, 103 (Tenn. 2010). In doing so, we make a fresh determination of whether the requirements of Rule 56 of the Tennessee Rules of Civil Procedure have been satisfied. Estate of Brown, 402 S.W.3d 193, 198 (Tenn. 2013) (citing Hughes v. New Life Dev. Corp., 387 S.W.3d 453, 471 (Tenn. 2012)).
* * *
[I]n Tennessee, as in the federal system, when the moving party does not bear the burden of proof at trial, the moving party may satisfy its burden of production either (1) by affirmatively negating an essential element of the nonmoving party's claim or (2) by demonstrating that the nonmoving party's evidence at the summary judgment stage is insufficient to establish the nonmoving party's claim or defense. . . Tennessee Rule 56.03 requires the moving party to support its motion with "a separate concise statement of material facts as to which the moving party contends there is no genuine issue for trial." Tenn. R. Civ. P. 56.03. . . When such a motion is made, any party opposing summary judgment must file a response to each fact set forth by the movant in the manner provided in Tennessee Rule 56.03. "[W]hen a motion for summary judgment is made [and] . . . supported as provided in [Tennessee Rule 56], " to survive summary judgment, the nonmoving party "may not rest upon the mere allegations or denials of [its] pleading, " but must respond, and by affidavits or one of the other means provided in Tennessee Rule 56, "set forth specific facts" at the summary judgment stage "showing that there is a genuine issue for trial." Tenn. R. Civ. P. 56.06. The nonmoving party "must do more than simply show that there is some metaphysical doubt as to the material facts." Matsushita Elec. Indus. Co., 475 U.S. at 586, 106 S.Ct. 1348. The nonmoving party must demonstrate the existence of specific facts in the record which could lead a rational trier of fact to find in favor of the nonmoving party. . . However, after adequate time for discovery has been provided, summary judgment should be granted if the nonmoving party's evidence at the summary judgment stage is insufficient to establish the existence of a genuine issue of material fact for trial. Tenn. R. Civ. P. 56.04, 56.06. The focus is on the evidence the nonmoving party comes forward with at the summary judgment stage, not on hypothetical evidence that theoretically could be adduced, despite the passage of discovery deadlines, at a future trial.

Rye v. Women's Care Cntr. of Memphis, MPLLC, 477 S.W.3d 235, 250, 264-65 (Tenn. 2015).

         We review the trial court's ruling on a motion for summary judgment de novo with no presumption of correctness, as the resolution of the motion is a matter of law. Martin v. Norfolk S. Ry., 271 S.W.3d 76, 84 (Tenn. 2008); Godfrey v. Ruiz, 90 S.W.3d 692, 695 (Tenn. 2002). We view the evidence in favor of the non-moving party by resolving all reasonable inferences in its favor and discarding all countervailing evidence. Stovall v. Clarke, 113 S.W.3d 715, 721 (Tenn. 2003); Godfrey, 90 S.W.3d at 695.

         III. Analysis

         Appellant alleges that he was discriminated against on the basis of his age, in violation of the Tennessee Human Rights Act ("THRA"), and his disability, in violation of the Tennessee Disability Act ("TDA").

         The THRA, codified at Tennessee Code Annotated sections 4-21-101, et seq., "prohibits employers from discriminating against their employees who are forty years old or older because of their age"; specifically, it "prohibits age discrimination in hiring, firing, fixing compensation, or defining the terms and conditions of employment." Williams v. Greater Chattanooga Pub. Television Corp., 349 S.W.3d 501, 509 (Tenn. Ct. App. 2011) (citing Tenn. Code Ann. § 4-21-401(a)(1)-(3), (b)); Wilson v. Rubin, 104 S.W.3d 39, 48 (Tenn. Ct. App. 2002)). To recover for unlawful age discrimination, an employee must prove that "considerations of age not only played a role in but determinatively influenced the employer's decision." Williams, 349 S.W.3d at 509 (citing Wilson, 104 S.W.3d at 51-52).

         The TDA prohibits employers from discriminating against employees on the basis of an employee's disability. Tenn. Code Ann. § 8-50-103(b); Bennett v. Nissan N. Am., Inc., 315 S.W.3d 832, 841 (Tenn. Ct. App. 2009). The TDA "embodies the rights and definitions provided by the [THRA]." Barnes v. Goodyear Tire & Rubber Co., 48 S.W.3d 698, 705 (Tenn. 2000), abrogated on other grounds by Gossett v. Tractor Supply Co., Inc., 320 S.W.3d 777 (Tenn. 2010). When an employee brings a claim under the TDA, the employee must prove three elements to prevail: "'(1) that the individual was qualified for the position; (2) that the individual was disabled; and (3) that the individual suffered an adverse employment action because of that disability.'" Bennett, 315 S.W.3d at 841 (quoting Barnes, 48 S.W.3d at 705).

         Employees pursuing an employment discrimination claim under the THRA or TDA may carry their burden of proof by introducing either direct or indirect evidence. Bennett, 315 S.W.3d at 841 (citing Barnes, 48 S.W.3d at 705 (recognizing that "[t]he third element, or causation element, [of a TDA claim] may be established by either direct or indirect evidence of discrimination")); Wilson, 104 S.W.3d at 49 (citing Moore v. Nashville Elec. Power Bd., 72 S.W.3d 643, 651 (Tenn. Ct. App. 2001); Perlberg v. Brencor Asset Mgt., Inc., 63 S.W.3d 390, 394-95 (Tenn. Ct. App. 2001)). Where the employee attempts to show discrimination by indirect evidence, the employee must first establish a prima facie case of discrimination. Wilson, 104 S.W.3d at 50. This "creates a rebuttable presumption that the employer unlawfully discriminated against the employee." Id. "The effect of the presumption is to place on the employer the burden of producing evidence that the challenged employment action was taken for legitimate, non-discriminatory reasons." Id. If the employer succeeds in producing evidence showing a legitimate, non-discriminatory reason for the adverse employment action, the employee then must "demonstrate that the employer's proffered reasons are pretextual and that unlawful discrimination was the true reason for the challenged employment action." Id.

         In their motion, Defendants asserted that they "have submitted affirmative evidence that the Plaintiff was terminated from their employment, not because of his age or alleged disability, but because of his poor performance and the discovery of his prior criminal convictions for mail fraud and money laundering."[1] In the Memorandum supporting the motion, Defendants assumed for the purposes of summary judgment that Plaintiff could show a prima facie case of discrimination on the basis of age and disability; they argued that Plaintiff's evidence was insufficient to establish his claim because "[t]he Plaintiff cannot demonstrate through significant probative evidence that these legitimate, nondiscriminatory reasons are pretextual in nature." The effect of Defendants' concession was to place the burden on them to produce evidence in support of their contention that Plaintiff was terminated for legitimate, nondiscriminatory reasons, i.e., poor performance and an undisclosed criminal conviction. See Wilson, 104 S.W.3d at 51.

         In compliance with Tennessee Rule of Civil Procedure 56.04, Defendants filed a Statement of Material Facts, to which Plaintiff responded; the facts which Plaintiff did not dispute are as follows:[2]

1. This matter arises out of Plaintiff Warren Schede's joint employment with the Defendants.
2. The Plaintiff was employed by the Defendants as a bookkeeper from July 21, 2008 until his termination on September 11, 2015.
3. The Plaintiff's primary job tasks included handling accounts receivable, accounts payable, certified payroll, contracts, and general accounting.
4. The Plaintiff's job tasks would include submitting biannual and annual accounting reports to Defendants' accountant, Jack Sherrod.
6. Defendants are contractors who service federal contracts that require bonds.
7. In order to obtain the requisite bonds, the Defendants' must submit accurate biannual and annual reports to bonding agents.
8. If the Defendants are not bonded, they are unable to bid for government contracts.
14. The Plaintiff was notified of many of his errors by email from his supervisor, Ms. Brandy Justice.
RESPONSE: Plaintiff agrees it is undisputed that he from time to time received e-mails from Brandy Justice and that several of those e-mails are in the summary judgment record. It is disputed that "many" of the errors or concerns addressed in those e-mails were problems of his making since the problems most often were attributable to Ms. Justice herself.
15. Due to the Plaintiff's noticeable decline in performance, the Defendants began looking for additional staff to supplement the Plaintiff's work.
RESPONSE: The first statement of fact is that prior to Plaintiffs termination, Defendants began looking for another employee to perform some of Plaintiffs job duties. This fact is undisputed. The second statement of fact is that this search was undertaken "due to Plaintiff's noticeable decline in performance." This fact is disputed.
16. In the spring of 2015, the Defendants hired Cindy Bias to handle the Plaintiff's certified payroll tasks.
19. On June 4, 2015, the Plaintiff underwent surgery to replace a defibrillator and pacemaker.
20. On July 27, 2015, the Plaintiff experienced a medical emergency at work and was transported to the hospital by ambulance.
22. In 1994, the Plaintiff pled guilty to mail fraud and money laundering in the U.S. District Court for the Eastern District of Tennessee.
23. Plaintiffs convictions arose out of the Plaintiff's position as Division Vice President and Controller of the Retail Division of Clayton Homes, Inc.
24. During Plaintiffs employment with Clayton Homes, Inc. the Plaintiff transferred $2, 979, 709.00 in corporate funds into his personal banking account for his personal benefit.
25. The Plaintiff served three years in federal prison for his crimes.
29. On September 11, 2015, the Defendants discovered that the Plaintiff had written a paycheck to an employee in the wrong amount at the incorrect pay rate.
33. The Plaintiff agreed he was never harassed at work because of his age.
34. The Plaintiff admitted he has never known the Defendants to discriminate against anyone because of their ages.
35. The Defendants employ or have employed multiple persons over the age of fifty including owner Richard Justice (age 58) and Jerry Crowe (age 61), the Plaintiff's immediate coworker at the time of his termination.
36. As of November 25, 2015, twenty-six (26) of Defendants' fifty-four (54) employees are over the age of fifty (50) years old.
38. The Plaintiff and owner Richard Justice had conversations about their physical ailments, often commiserating about ...

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