Court Opinion

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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Precedential or Non-Precedential: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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                  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

                                  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.

                                 19