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Nature of Suit Code: 791
Nature of Suit: Employee Retirement Income Security Act (ERISA)
Cause of Action: 

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PUBLISHED 

UNITED STATES COURT OF APPEALS F I L L D 

United States Court of Appeals TENTH CIRCUIT . Tenth CiI"Cuit 

JOHN F. PHELPS , ) 

) 

Plaintiff-Appellant ) 

) 

v. ) 

) 

FIELD REAL ESTATE COMPANY, ) 

BANK WESTERN, WESTERN CAPITAL) 

INv'ESTMENT CORPORATION, ) 

W. DOUGLAS POOLE, NORMAN ) 

MARSH, and ONE OR MORE JOHN ) 

COE DEFENDANTS, ) 

) 

Defendants-Appellees ) 

APR 1 6 1993 

ROBERT L. HOECKER 

Clerk . 

No. 92-1029 

APPEAL FROM THE UNITED STATES DISTRICT COURT 

FOR THE DISTRICT OF COLORADO 

(D. C. No. 89-M-2019) 

Christopher N. Kammel (Steven G. York, with him on the brief), 

Pryor, Carney & Johnson, P.C., Englewood, Colorado, for PlaintiffAppellant. 

Jeffrey T. Johnson (Charles R. Jaeger and Robert E. Benson, with 

him on the brief), Holland & Hart, Denver, Colorado, for 

Defendants-Appellees. 

Before TACHA and BRORBY, Circuit Judges, and BROWN, Senior District 

Judge* 

BROWN, Senior District Judge. 

* The Honorable Wesley E. Brown, Senior United States District 

Judge for the District of Kansas, sitting by designation. 

Appellate Case: 92-1029 Document: 010110212756 Date Filed: 04/16/1993 Page: 1 
Plaintiff-Appellant John Phelps (Phelps) sought recovery for 

an alleged violation of Section 510 of ERISA, 29 u.s.c. § 1140, 

which prohibits discrimination against participants of any employee 

benefit plan for the purpose of interfering with rights under such 

plan. He also sought damages for alleged discrimination under a 

Colorado statute prohibiting employer discrimination against those 

with handicaps, C.R.S. §24-34-402(1) (a). 1 

Phelps began work as a commercial real estate division manager 

for defendant Field Real Estate Company in February, 1985. 2 In 

November, 1986, he learned that he had tested positive for the 

virus which causes the disease Acquired Immune-Deficiency Syndrome 

(AIDS). On August 4, 1989, Phelps was discharged from his employment, and this resulted in his loss of insurance benefits. 

The district court found that Phelps had failed to prove the 

requisite intent to violate 29 u.s.c. 1140 and that he had likewise 

failed to prove that he was discharged or discriminated against in 

violation of Colorado law. Phelps v. Field Real Estate, 793 F. 

Supp. 1535 (D.Colo. 1991) 

1 John Phelps died on July 6, 1992, and Jay A. Swope was 

appointed as his personal representative by the Probate Court of 

Denver, Colorado. Mr. Swope has been substituted as appellant in 

this appeal. 

2 Defendant Western Capital Investment Corporation was formed 

as a savings and loan holding company to own and operate 

subsidiaries Bank Western, a federal savings bank, Field Real 

Estate Company, Field Mortgage Company, Institutional Investors 

Corp. and Western Insurance Service, Inc. 

Defendant w. Douglas Poole became Chairman of the Board and 

Chief Executive Officer of Field in November, 1974. Defendant 

Norman Marsh was Executive Vice-President and Secretary-Treasurer 

of Field, responsible for personnel matters, and reporting directly 

to Poole . 

2 

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Phelps contends that the district court misconstrued the 

nature of the showing required for liability under ERISA § 510, and 

that under the facts found by the trial court, Phelps met his 

statutory burden of proof under the Colorado handicap 

discrimination statute. In this respect, Phelps accepts the 

findings of fact as found by the district court, but contends that 

its conclusions of law from those facts are erroneous. 

A summary of the district court's findings of fact establishes 

this sequence of events: 

Prior to February, 1985, when he began working for defendant 

Field Real Estate, Phelps had obtained an M.B.A. from Arizona State 

University, served two years in Vietnam, and began work as a real 

estate salesman in Pueblo, Colorado, in 1974. In 1979, he began 

work with Fuller & Company in Denver, selling commercial real 

estate, including undeveloped land. He obtained a real estate 

broker's license in 1983 but wanted to move into management; and, 

following an interview with Ray Stanley, then president of Field 

Real Estate Company, in February, 1985, he entered the Field 

organization as vice president of the commercial real estate 

division at $60,000 per year plus 3.5% commission with a guarantee 

of $82,000 during the first two years. At this time, W. Douglas 

Poole was chairman of the board and chief executive officer of 

Field. 

When Phelps began work, a job specification was created for 

the commercial real estate division manager. Under this, the 

3 

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position was described as general management of the division 

without any direct selling, in accordance with Phelps' wishes. 

The commercial real estate division was divided into a 

commercial sales division and a commercial leasing division. 

Phelps was manager of commercial sales and reported directly to 

Poole, while Ray Stanley was manager of commercial leasing. 

At the outset, there was some conflict with Poole as to the 

expected volume of business which would be generated. Phelps 

believed that each sales agent could be expected to generate $2 

million in sales per year, while Poole stated he expected $8 

million per agent in each year. Poole's background was in retail 

sal es, and he had had no experience in the real estate business. 

However, the two appeared to get along well; and Poole felt that 

Phelps did a good job in 1986 and 1987. 

In November, 1986, Phelps learned that he was infected with 

the AIDS virus; but he was not ill, he had no symptoms of disease, 

and his condition did not interfere with his ability to perform his 

job. He kept his infection secret and did not disclose his medical 

condition to anyone. 

By letter dated January 22, 1987, Poole extended Phelps' 

employment letter with the same compensation and benefits except 

that Phelps was to be granted listing agreements, beginning with 

the "Midland Building." Additional listing agreements were to be 

selected by Poole . 

Annual performance evaluations were made by Poole, rating 

employees from 5 down. Poole gave Phelps mostly 3's for the 1986 

4 

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evaluation. The only written comment under "areas for growth" was 

"needs to take a more hands-on approach to job." 

On May 8, 1987, Phelps and Norman Marsh, manager of 

accounting, administration and personnel and assistant to Poole, 

were made senior vice presidents of Field. 

In the annual review for 1987, Phelps was given mostly 4's, 

with note that Phelps needed "more personal involvement in 

development of third party business," and that he needed to reduce 

his outside activities in order to concentrate on developing the 

commercial sales division. Poole resented the time that Phelps 

spent away from the office, but he and Phelps continued to have a 

good working relationship. 

In March, 1988, Poole found an anonymous note on his desk from 

"Members of the Staff, " advising that Phelps had a fatal blood 

disease and requesting that he be transferred. When Phelps was 

shown the note, he told Poole that the note was true, that he had 

kept his condition a secret, and that he was concerned about his 

job and keeping his insurance. Poole assured Phelps that the 

matter would be kept in confidence and that, so long as Phelps was 

at Field, he had nothing to worry about. 3 

Poole was concerned about Phelps' condition; the matter was 

discussed at a board meeting on May 3, 1988, and Poole and Phelps 

had another meeting on May 24, 1988. Phelps spoke of his disease 

as "diminished lymphoma, " a phrase with no medical meaning, and 

3 The trial court accepted Phelps testimony regarding the 

substance of this meeting with Poole. 

5 

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told Poole that it involved a dormancy period of 8 to 10 years, and 

that when the disease became active, there would be 2 to 3 years of 

productivity and then death. Poole was concerned with corporate 

liability; and, because there was a possibility Field might be 

sold, there could be a problem about securing "key man" insurance 

for Phelps. 

In June, 1988, Phelps went to see Dr. Kerr about the problem 

of obtaining insurance and obtained a letter from him which 

concealed more than it revealed. 4 The doctor's letter stated in 

pertinent part that: 

The tests for which I am aware of in (Phelps' ) case 

indicate that, although currently able to perform all the 

duties of your occupation, owing to your past exposure to 

potentially injurious agents, you are at increased risk 

for certain types of cancers and other conditions. It is 

my opinion that the agents detected by the tests which I 

am aware of are likely to be discovered in the course of 

the routine tests that are generally administered to 

determine an individual's insurability, and that it is 

highly likely that an insurer would decline to issue a 

policy to you on this basis. 

Again, I would wish to emphasize that, from a medical 

standpoint, you are presently able to satisfactorily 

perform all of the duties of your current position, and 

that your condition does not pose any health threat to 

anyone whom you may encounter in the workplace. 

The doctor's letter was given to Poole, and Poole stated that he 

was "completely satisfied" that Phelps was capable of doing his 

job. 

4 At the doctor's request, Phelps drafted this letter and, 

after making some changes, the doctor signed it. There was no 

mention of the AIDS virus, and all references to future risk were 

related to an example based upon blood tests relating to the 

presence of "Agent Orange". 

6 

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On July 10, 1988, Poole placed a blind classified ad for a 

"real estate commercial division manager. 11 The job description was 

applicable to Phelps' position, and also to Stanley's position, the 

leasing manager. Other anonymous notes appeared; there was some 

conflict between Poole and Phelps, and on July 23 and 24, Poole met 

with managers and real estate agents and informed them he was 

considering a new division to handle "REO properties," properties 

with defaulted loans. one agent asked Poole why he had called the 

meeting. Poole stated "that some people thought Phelps' job was in 

jeopardy, but it wasn't. " 

In January, 1989, there was another annual evaluation of 

employees. Phelps was given 4 's on all categories, but under 

"performance" Poole wrote the following: 

The Commercial Sales division's development over the past 

three years has been very poor both from the 

standpoint of recruiting productive agents as well as 

meeting Company objectives growthwise. 

Phelps was allowed to write and place a rebuttal of this 

evaluation in his file. In this rebuttal, Phelps admitted that the 

Commercial Division had lost money in 1988, but he attributed the 

loss to three external causes--a decline in Denver's overall 

economy; market prices declining below Bank Western•s inventory 

prices; and loss of confidence by the sales force due to the 

classified ad for a "commercial division manager," which resulted 

in the loss of two sales agents. 

The district court found that sal es performance was adversely 

affected by general market conditions, and that the Bank was "very 

reluctant to accept offers on bank property which had been acquired 

7 

Appellate Case: 92-1029 Document: 010110212756 Date Filed: 04/16/1993 Page: 7 
through foreclosures at any price less than the book value." This 

was because the bank did not want to record a loss, "which could 

have a negative effect" on bank regulators. 

On August 2, 1989, Phelps found the following memorandum under 

his office door, purportedly from Poole, concerning "Management 

Changes": 

I am please (sic) to announce that a very capable 

individual from a major national brokerage firm has 

agreed to join Field Real Estate Company as our general 

manager for sales and leasing. His arrival shall be very 

soon. 

Of course, many changes will be taking place. Present 

managers will have their responsibilities changed and in 

a limited number of circumstances some positions may be 

merged or eliminated ..•.. 

Poole did not write this memorandum; and, while he had been 

planning a reorganization, "he was outraged at this leak and 

premature disclosure." Poole also tried to retrieve copies of the 

purported memorandum which had been distributed to a small group of 

management. 

The Field Board of Directors met on August 4, 1989, and Poole 

presented a plan to restructure the commercial sales and leasing 

division into three divisions, adopting a more specialized 

approach. Gene Goodstat who had been hired in mid-July would head 

the industrial di vision, Ray Stanley was to manage the retail 

division, and an office division was to be directed by Tony 

Leuthold who had been hired to begin August 7. Phelps was to be 

relieved effective immediately. The board had reservations about 

Stanley because of past performance, and he was counseled that his 

future was limited. Stanley left the company a few months later. 

8 

Appellate Case: 92-1029 Document: 010110212756 Date Filed: 04/16/1993 Page: 8 
Marsh and Poole met with Phelps on August 4, 1989, to tell him 

he was being discharged because of poor performance of the division 

and because of the reorganization. Phelps asked if they knew they 

were firing someone with AIDS and that terminating his job would 

also terminate his insurance benefits. Poole's response was that 

he was sorry, and Poole and Marsh both stated that they did not 

know that Phelps had AIDS. Marsh suggested that Phelps could stay 

on as a real estate agent, working on commissions, and then he 

could continue his insurance at his own expense. Phelps ~eclined 

to do so. This offer was repeated by letter of August 17, 1989, 

but it was rejected and Phelps filed this action on November 21, 

1989. 

The ERISA Claim 

Section 510 of ERISA, 29 u.s.c. §1140, provides in part 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 ... for the purpose of interfering with 

the attainment of any right to which such participant may 

become entitled under the plan.... (Emphasis supplied) 

As noted by the district court, Phelps was required to prove, by a 

preponderance of the evidence, that his discharge was motivated by 

an intent to interfere with employee benefits protected by ERISA. 5 

Cf. Conkwright v. Westinghouse Elec. Corp., 933 F. 2d 231, 235 

( 4th Cir. 1991) . In order to establish this intent, the courts 

5 The parties stipulated that Phelps participated in employee 

benefit programs, which included health insurance, life insurance, 

and long-term disability plans, all of which were governed by 

ERISA . 

9 

Appellate Case: 92-1029 Document: 010110212756 Date Filed: 04/16/1993 Page: 9 
have looked to circumstantial evidence surrounding the employment 

decision because there is rarely direct evidence of wrongful 

intent. Gavalik v. Continental Can Co . , 812 F. 2d 834, 851 (3rd 

Cir. 1987), cert. den. 484 U.S. 979, and Dister v. Continental 

Group, Inc., 859 F. 2d 1108, 1112 (2nd Cir. 1988). 

Since Poole was the one who personally made the decision to 

discharge Phelps, the question thus was whether Poole fired Phelps 

because "at least in part," Poole wanted to protect the benefit 

plans from the effect of Phelps' health condition. As noted by the 

dist rict court, "(p)ut bluntly, was Poole motivated to save the 

costs of health care, disability and death benefits as the expected 

consequences of the plaintiff's developing AIDS?" 

Phelps contends that his appeal "is based entirely, and only, 

upon the facts found and accepted by the trial court 11 • 6 As a part 

of its findings, the district court determined that Poole in fact 

was aware that Phelps had AIDS, but that this was not the 

motivating factor for Phelps' discharge. In this respect, the 

district court found that "sales performance was a serious problem 

in the summer of 1988, " and that placement of the ad for a new 

manager on July 12, 1988, "was an awkward effort to motivate Phelps 

to resign." The court found that "(f)or whatever reason, Poole 

6 During the trial, the court stated the case in this manner: 

Trials of this nature are considerably different because 

in a very real sense what happened here is not so much in 

dispute. It's why it happened. And what this case 

involves is something of a trial of the soul, and that's 

not easily proved what people do in the recesses of their 

own souls. Yet that's the inquiry that I must make. (Vol 

II, Aplt. Appendix, p. 380) 

10 

Appellate Case: 92-1029 Document: 010110212756 Date Filed: 04/16/1993 Page: 10 
failed to confront Phelps directly about his health. The lack of 

candor between these two men affected the working relationship 

between them. Yet, a failure of leadership or ineffective 

management of this difficult situation is not equivalent to 

discriminatory treatment for the purpose of protecting the assets 

of the employee plans." 

While there was evidence concerning the possible effect of an 

AIDS patient on benefit plans, the record supports the district 

court's conclusion that there was "no evidence that Poole, Marsh or 

anyone else in Field's management made any such calculations or 

even expressed any awareness of such consequences," and we agree 

that it is also significant that Phelps' termination was not made 

until more than fourteen months after he first disclosed his 

medical condition. In addition, the evidence was that the 

commercial sales division failed to meet the expectations of Poole 

and his board of directors. Whether or not this was in fact 

Phelps' fault, the fact remains that the commercial sales and 

leasing department was completely reorganized into three divisions, 

with new employees heading the industrial and office divisions, 

with Ray Stanley in charge of the retail division. It is 

significant that Stanley was warned that his future was limited and 

that he, too, left the company soon after the reorganization. 

Under this evidence, the district court's conclusion that 

Phelps had failed to prove the intent required by Section 510 of 

ERISA was correct. 

11 

Appellate Case: 92-1029 Document: 010110212756 Date Filed: 04/16/1993 Page: 11 
The Colorado Statutory Claim 

Phelps also claims that he is entitled to recover for handicap 

discrimination under the Colorado Statute C.R.S. § 24-34-402(1) (a) 

which provided that it was "a discriminatory or unfair employment 

prac:::tice," 

(a) for an employer to refuse to hire, to discharge, to 

promote or demote, or to discriminate in matters in 

compensation against any person otherwise qualified 

because of handicap, race, creed, color, sex, national 

origin, or ancestry, but, with regard to a handicap, it 

is not a discriminatory or unfair employment practice for 

an employer to act as provided in this paragraph (a) if 

there is no reasonable accommodation that the employer 

can make with regard to the handicap, the handicap 

actually disqualified the person from the job, and the 

handicap was a significant impact on the job •... 

In this case, the defendants agreed that having AIDS or being 

HIV-positive was a handicap within this statute; but a plaintiff 

must prove that the employer knew or should have known of the 

handicap and a need for accommodation. See Nathanson v. Medical 

College of Pennsylvania, 926 F. 2d 1368, 1381-82 (3rd Cir. 1991) 

involving similar law. 7 Here, Phelps was HIV-positive, but without 

7 It appears that defendants here agreed that Phelps would be 

covered by the Colorado Statute. see, however, Hilton v. 

Southwestern Bell Telephone Co., 936 F. 2d 823 (5th Cir. 1991), 

cert. den. 116 L.Ed. 2d 813, involving a Texas statute which 

prohibited discrimination against those with handicaps. There a 

drafting clerk tested HIV positive, but was capable of performing 

all of his duties at work, but because he had developed a very low, 

"life threatening" blood platelet count, even sedentary jobs were 

"implausible," since any small bump or bruise could be fatal. The 

court found that while Hilton was "totally disabled," he was not a 

"handicapped person" under the Texas statute. 

Southwestern Bell treated all of its employees with AIDSrelated conditions as disabled and provided long-term disability 

plans with medical insurance for such employees. In August, 1989, 

Southwestern had 18 employees in the Dallas division who had been 

diagnosed with AIDS, and 11 of those were still working. See 

footnote 3, 936 F. 2d at 827. 

12 

Appellate Case: 92-1029 Document: 010110212756 Date Filed: 04/16/1993 Page: 12 
illness, and could perform all of the duties of his employment. He 

did not ask for any special consideration and, in fact, wished to 

keep his condition private and secret. There was no question of 

"accommodation" for his handicap because it did not affect his 

physical ability to perform. In addition, as discussed above, it 

is clear that the decision to terminate Phelps was based upon a 

legitimate business decision to reorganize his department. 

The findings of the district court are fully supported by the 

record and are not clearly erroneous. 8 The judgment is AFFIRMED. 

8 Phelps moved to certify questions to the Colorado Supreme 

Court concerning the interpretation of C.R.S. § 24-34-301 discussed 

supra. 

The issues raised in Phelps' appeal solely involve questions 

of fact. Following our review of the record, we have determined 

that the district court properly found that Phelps had failed to 

establish that defendants had violated ERISA provisions, or the 

state statutory provision. In view of the finding that plaintiff 

was terminated for non-discriminatory reasons, the Motion for 

Certification is denied. 

13 

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