Court Opinion

ID: 3017426
Source: CourtListenerOpinion
Date Created: 2015-10-13 22:17:14.830831+00
Date Added: 2024-06-11T12:45:41.640454
License: Public Domain

___________

                                     No. 95-3764
                                     ___________

Linda Adam-Mellang,                       *
                                          *
     Plaintiff-Appellant,                 *
                                          * Appeal from the United States
     v.                                   * District Court for the
                                          * District of Minnesota.
Apartment Search, Inc.;                   *
William Deters,                           *
                                          *
     Defendants-Appellees.                *
                                     ___________

                       Submitted:    June 10, 1996

                           Filed:    September 17, 1996
                                     ___________

Before BOWMAN, LAY, and LOKEN, Circuit Judges.
                               ___________

LOKEN, Circuit Judge.

     This is an interlocutory appeal from the denial of a preliminary
injunction.   Linda Adam-Mellang commenced this action seeking, inter alia,
the involuntary dissolution of her employer, Apartment Search, Inc., on the
grounds that Apartment Search and its chief executive officer, William
Deters, have engaged in on-going sex and age discrimination in violation
of federal and Minnesota law.         Apartment Search promptly removed Adam-
Mellang   from   its    board   of    directors    and   placed   her   on   "unpaid
administrative leave."     Adam-Mellang appeals the district court's1 denial
of a preliminary injunction reversing those actions.          Concluding that she
has failed to prove irreparable injury, we affirm.

     1
      The HONORABLE RICHARD H. KYLE, United States District Judge
for the District of Minnesota.
                                           I.

     After fifteen years with Apartment Search, Adam-Mellang had risen to
the rank of General Manager of its Twin Cities office.               She was also a
member of the company's Board of Directors and owned 2.7 percent of the
outstanding shares of this closely held corporation.           In August 1995, she
complained   to   Deters   that   recent    salary   and   stock   option   decisions
reflected a pattern of unlawful discrimination.               When Deters did not
respond to this complaint to her satisfaction, she commenced this action.

     Three factual aspects of this case frame the preliminary injunction
issues.   First, Adam-Mellang's Complaint includes a request that Apartment
Search be involuntarily dissolved pursuant to Minn. Stat. § 302A.751
because the company's sex and age discrimination have prejudiced Adam-
Mellang "in her capacity as a shareholder, director and employee."                 On
September 28, 1995, after the Complaint was filed, Apartment Search's Board
of Directors passed a series of resolutions declaring that Adam-Mellang had
breached her fiduciary duty to the corporation by seeking its dissolution
and now had a conflict of interest with her employer.          On October 23, after
the district court had denied Adam-Mellang's motion for a preliminary
injunction, the Board placed her "on administrative leave with benefits but
without compensation."       On October 27, the corporation's shareholders
removed her from the Board of Directors.

     Second, defendants admit that Adam-Mellang was removed from the Board
of Directors and placed on unpaid administrative leave because she filed
a lawsuit demanding that the company be involuntarily dissolved.            If these
actions constitute unlawful retaliation under state or federal law -- a
question the district court considered "close" -- retaliation need not be
inferred.    It has been admitted.

                                       -2-
      Third, Adam-Mellang's verified Complaint alleged that defendants have
also discriminated against the other female member of Apartment Search's
Board, Patricia Hovland.      In her affidavit in support of a preliminary
injunction, Adam-Mellang further alleged that Hovland initially agreed they
were both being treated unfairly, but that Hovland now refuses to speak to
Adam-Mellang's attorney.      Therefore, Adam-Mellang concluded, "I believe
that Deters and Apartment Search have subjected Hovland to the same
intimidation to which they have subjected me in order to chill and
discourage her from being a participant or witness in this case."
      In   opposing   the   motion    for   preliminary   injunction,      defendants
submitted Hovland's lengthy affidavit denying that she has been the victim
of   sex or age discrimination, denying Adam-Mellang's allegations of
specific discriminatory or retaliatory employment actions, and stating that
Hovland    could   not   support     Adam-Mellang's   claims    of   sex    and   age
discrimination in the Apartment Search workplace.         Adam-Mellang's attorneys
argue that Hovland's affidavit demonstrates that she has been intimidated
by the retaliatory actions taken against Adam-Mellang.               However, Adam-
Mellang submitted no factual response to the Hovland affidavit, and the
district court found this affidavit "credible."

      Before denying Adam-Mellang's motion for a preliminary injunction,
the district court properly examined the four factors to be weighed in
deciding whether to grant or deny a preliminary injunction -- "(1) the
threat of irreparable harm to the movant; (2) the state of balance between
this harm and the injury that granting the injunction will inflict on other
parties litigant; (3) the probability that movant will succeed on the
merits; and (4) the public interest."          Dataphase Systems, Inc. v. C.L.
Systems, Inc., 640 F.2d 109, 114 (8th Cir. 1981) (en banc).                The court
concluded that Adam-Mellang has not met her burden of proof on the first
three factors and that the public interest "does not weigh heavily either
for or against issuance of the preliminary injunction."

                                        -3-
Because "the failure to show irreparable harm is, by itself, a sufficient
ground upon which to deny a preliminary injunction," we only address that
issue.      Gelco Corp. v. Coniston Partners, 811 F.2d 414, 418 (8th Cir.
1987); see Dataphase, 640 F.2d at 114 n.9.

                                           II.

        "The basis of injunctive relief in the federal courts has always been
irreparable harm and inadequacy of legal remedies."          Beacon Theatres, Inc.
v. Westover, 359 U.S. 500, 506-07 (1959).            Adam-Mellang argues that she
proved sufficient threat of irreparable injury because of (1) her placement
on unpaid administrative leave, (2) her removal from the Apartment Search
Board      of   Directors,   and   (3)   the   chilling   effect   that   defendants'
unrestrained retaliation will have on other claimants and witnesses,
particularly Patricia Hovland.           We examine each of those contentions in
turn.

        (1) Adam-Mellang's loss of income from being placed on administrative
leave is not irreparable injury because she has an adequate remedy at law,
namely, the damages and other relief to which she will be entitled if she
prevails in this action.           When a terminated employee sues for wrongful
discharge, her "temporary loss of income, ultimately to be recovered, does
not usually constitute irreparable injury."           Sampson v. Murray, 415 U.S.
61,   90    (1974).    In Sampson, the Supreme Court acknowledged that a
discharged employee might be entitled to a preliminary injunction in a
"genuinely extraordinary situation" but stated that a satisfactory showing
of loss of income coupled with damage to reputation "falls far short of the
type of irreparable injury which is a necessary predicate to the issuance
of a temporary injunction in this type of case."          Id. at 91-92 & n.68.     In
this case, even assuming that Adam-Mellang's placement on administrative
leave is comparable for these purposes to a discharge, she has not shown

                                          -4-
that this is a "genuinely extraordinary situation" for which she has no
adequate remedy at law.

     (2) Adam-Mellang places greater emphasis on her removal from the
Apartment Search Board of Directors, arguing that removal causes her
irreparable injury because it deprives her of a voice in management,
precludes her from examining corporate books and records, and leaves her
with no way to protect her ownership interest in the company.   In rejecting
this contention, the district court commented, "Adam-Mellang's position
revolves around a paradox:   she would like to remain as an employee and a
director of a corporation which she wishes to dissolve and liquidate."   The
court concluded that the civil rights laws are not "designed or intended
to force a corporation to keep as a director or even a person in senior
management [an] employee [who] is bringing an action to dissolve the
corporation."   We agree.

     Adam-Mellang relies primarily on cases in which minority shareholders
and directors have been granted preliminary injunctive relief against
corporate actions by those with a controlling interest in the corporation,
such as AHI Metnall v. J.C. Nichols Co., 891 F. Supp. 1352 (W.D. Mo. 1995);
Davis v. Rondina, 741 F. Supp. 1115 (S.D.N.Y. 1990); and Street v. Vitti,
685 F. Supp. 379 (S.D.N.Y. 1988).    The preliminary injunctive relief in
those cases was based upon irreparable injury to rights arising under
corporate law, or to contractual rights under a shareholders' agreement.
Here, corporate and contract law provide no basis for such relief.    Adam-
Mellang has no right to remain on the Apartment Search Board of Directors.
Her removal is not alleged to be contrary to corporate law, a shareholders'
agreement, or a governing corporate instrument.   And she has not explained
how removal from the Board

                                    -5-
of   Directors   will   irreparably     injure     her    position    as    a    minority
             2
shareholder.

      The issue, then, is whether plaintiff's removal from a board of
directors   is   irreparable   injury   in    an   employment     discrimination         or
retaliation lawsuit.     In this regard, as Adam-Mellang shifts the injury
focus from her role as employee to her role as a member of the Apartment
Search Board of Directors, her claim for protection under employment
discrimination laws weakens.    See, e.g., Chavero v. Local 241, Amalgamated
Transit Union, 787 F.2d 1154, 1157 (7th Cir. 1986).           That being so, removal
from the board of directors simply cannot be the type of "genuinely
extraordinary situation" in which a discharged employee is entitled to
preliminary injunctive relief in this type of case, at least in the absence
of additional claims of corporate mismanagement or breach of duty that
would, standing alone, warrant such relief.              In this case, corporate law
considerations counsel against preliminary injunction relief.                        As the
district court put it, "Apartment Search [has] a legitimate business
purpose in removing such an important employee from the active business of
the company, when the employee (and director) wishes to close the company
down by the force of the law."

      (3)   Finally,    Adam-Mellang    argues     that     placing   her       on   unpaid
administrative leave and removing her from the Board of Directors was such
clear retaliation for her assertion of sex and age discrimination claims
that, unless enjoined, it will chill other Apartment Search employees,
particularly Patricia Hovland, from asserting their statutory rights or
appearing as witnesses in this case.         A number of circuits have concluded
that the chilling effect of unrestrained retaliation can be irreparable
injury justifying a preliminary injunction.              However, those courts have
uniformly held

       2
       There is no by-law or agreement requiring Adam-Mellang to
sell her stock upon removal from the Board. She retains rights as
a shareholder to inspect corporate books and records. See Minn
Stat. § 302A.461.

                                        -6-
that a chilling effect of this nature will not be presumed.    It is an issue
of fact that the employee seeking a preliminary injunction must prove.    See
Marxe v. Jackson, 833 F.2d 1121, 1126 (3d Cir. 1987); Garcia v. Lawn, 805
F.2d 1400, 1405-06 (9th Cir. 1986); Holt v. Continental Group, Inc., 708
F.2d 87, 91 (2d Cir. 1983), cert. denied, 465 U.S. 1030 and 465 U.S. 1038
(1984).    We agree.

     In this case, the district court specifically rejected Adam-Mellang's
assertion that Hovland has been intimidated as having "no basis in the
record."    On appeal, Adam-Mellang relies entirely on the argument that
Hovland's "change of position" after Adam-Mellang filed suit demonstrates
that Hovland has been chilled.     But the facts of record do not support that
contention.    The minutes of the September 28 Board meeting reflect that it
was Hovland who moved for adoption of a resolution declaring "that there
was no discrimination against [Adam-Mellang] by the corporation through any
of its agents."        Hovland's lengthy, unchallenged affidavit explains in
detail the evolution of what Adam-Mellang chooses to call a change of
position.     In these circumstances, while we agree with other courts that
retaliation claims create an environment in which employee intimidation may
occur, we agree with the district court that Adam-Mellang has failed to
prove this kind of irreparable injury.

     We conclude that the district court did not abuse its discretion in
denying Adam-Mellang's motion for a preliminary injunction.        See Stuart
Hall Co. v. Ampad Corp., 51 F.3d 780, 784 (8th Cir. 1995) (standard of
review).    Accordingly, we affirm.

     A true copy.

              Attest:

                   CLERK, U. S. COURT OF APPEALS, EIGHTH CIRCUIT.

                                      -7-