1996 Decisions

Opinions of the United

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Precedential or Non-Precedential: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.

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1 

UNITED STATES COURT OF APPEALS 

FOR THE THIRD CIRCUIT 

___________ 

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
2 
3 

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 
4 

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." 
5 

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. 
6 

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 ERISAprotected 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 
7 

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 plaintiffemployee 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). 
8 

 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 
9 

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 
10 

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 ERISAprotected 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 ERISAprotected 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 
11 

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. ScheringPlough 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). 
12 

 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, nondiscriminatory reason for the discharge. To survive summary 

judgment when the defendant articulates a legitimate, nondiscriminatory 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, nondiscriminatory reason for discharging Kowalski. We have 
13 

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 nondiscriminatory 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 nondiscriminatory 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 nondiscriminatory 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. 
14 

 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 
15 

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 
16 

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. 
17 

 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. 
18 

 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. 
19 

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.