Court Opinion

ID: 4525064
Source: CourtListenerOpinion
Date Created: 2020-04-14 16:00:32.523336+00
Date Added: 2024-06-11T09:25:44.841969
License: Public Domain

United States Court of Appeals
                           For the Eighth Circuit
                       ___________________________

                               No. 19-1373
                       ___________________________

                               Richard Sherman

                                         Plaintiff - Appellant

                                        v.

                     Berkadia Commercial Mortgage LLC

                                    Defendant - Appellee
                                 ____________

                   Appeal from United States District Court
                 for the Eastern District of Missouri - St. Louis
                                 ____________

                          Submitted: January 16, 2020
                             Filed: April 14, 2020
                                ____________

Before COLLOTON, SHEPHERD, and ERICKSON, Circuit Judges.
                         ____________

ERICKSON, Circuit Judge.

    Richard Sherman alleges he was terminated from his employment by Berkadia
Commercial Mortgage LLC (“Berkadia”) in retaliation for actions protected by the
False Claims Act (“FCA”) and Missouri law. The district court1 granted Berkadia
summary judgment on all claims. Sherman appeals. We have jurisdiction under 28
U.S.C. § 1291, and we affirm.

I. Background

       Berkadia is a commercial real estate lender that specializes in mortgage loans
to developers of multifamily housing. Many Berkadia loans are insured by the
Federal Housing Administration. If a developer defaults on an insured loan, Berkadia
may assign the mortgage to the United States Department of Housing and Urban
Development (“HUD”) and recoup the unpaid balance. In order to obtain this
insurance, Berkadia’s mortgages must comply with HUD regulations. Berkadia has
an underwriting department that is responsible for ensuring the company’s loans
comply with HUD regulations. Berkadia also has a production department which
develops and originates the loan applications. Once the underwriters are done with
their work on a mortgage application, it is sent to HUD for its approval.

      In 2011 one of Berkadia’s offices was accused by HUD of “pushing the limits”
of acceptable conduct under HUD regulations. At least partially in response to these
complaints, Berkadia hired Sherman as an underwriter. Berkadia hoped that
Sherman’s presence would help to repair the company’s frayed relationship with
federal regulators. At the time of his hire Sherman had an excellent reputation for
compliance and an unusually good relationship with HUD. By 2013 Sherman had
become a senior vice president and the chief underwriter of Berkadia’s HUD group.
This put him in charge of a team of underwriters who reviewed mortgages for
adherence to HUD regulations and company rules prior to their submission to HUD.

      1
        The Honorable Rodney W. Sippel, Chief Judge, United States District Court
for the Eastern District of Missouri.

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        Sherman successfully reduced the HUD rejection rate on loans Berkadia
submitted. He also urged greater transparency with HUD, and recommended that
Berkadia notify HUD when it discovered a discrepancy between the company’s
practices and HUD regulations. In one instance, Sherman voiced a concern about
how Berkadia had handled a loan to a developer of an apartment complex in North
Carolina called the Calabash Project. Berkadia had issued the mortgage in 2010,
prior to the start of Sherman’s employment at Berkadia. In 2012 the developer
defaulted on the loan, and in 2013 a lawsuit was brought by a construction contractor
against Berkadia. An issue that arose in the suit was why certain fees accompanying
the loan were not disclosed to HUD at the time of submission. Berkadia’s internal
investigation of the matter found that one of its staff may have knowingly allowed the
company to submit the loan to HUD without disclosing the fees. After reviewing the
results of the investigation, Sherman advised Berkadia’s then-president to disclose
what Sherman considered to be a violation of HUD rules. But Berkadia, having
initially assigned the failed mortgage to HUD, ultimately decided to end the matter
by repurchasing the loan and absorbing the attendant loss.

       Another example of Sherman’s push for greater transparency occurred in 2015,
when Sherman raised concerns about Berkadia’s handling of a loan related to a
California apartment complex known internally as the Rancho Project. The original
mortgage Berkadia submitted, which HUD approved, failed to include an increase the
developer had requested to a bridge loan. Once Sherman realized that Berkadia’s
submission was inaccurate, he notified HUD of the increase, and HUD reapproved
the loan. Despite this resolution, and emails showing that Sherman had received
information about the bridge loan’s increase prior to the original submission,
Sherman told Berkadia’s Executive Committee that he believed his direct supervisor,
Phil Long, deliberately hid the increase from him to boost the chances that HUD
would accept the loan.

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       Sherman’s focus on HUD compliance sometimes created tension between
Berkadia’s production and underwriting teams. The production team complained
about Sherman’s withholding of approval based on what they perceived to be trivial
glitches in the origination process. One particular point of contention involved
HUD’s “bright-line rule,” which is a guideline that prohibits mortgage originators
from unduly influencing those who underwrite those mortgages. Sherman believed
that the production team occasionally attempted to improperly influence his
underwriting staff. Sherman contacted Long several times about potential bright-line-
rule violations. Long, for the most part, was receptive to Sherman’s concerns.
However, on at least one occasion, he accused Sherman of nitpicking and dismissed
what he perceived to be excessive worry. Long also rejected a question regarding the
bright-line rule that Sherman requested be added to the internal survey Berkadia
employees completed after each loan submission.

       There were others at Berkadia who expressed concern that Sherman had
adopted an excessively strict interpretation of HUD regulations and was prone to
overreaction when the company did not endorse his interpretation. Berkadia’s
production manager was among those who chafed under Sherman’s regulatory views.
Eventually the relationship between Sherman and the production manager became so
toxic that Long hired an outside consultant to assess and attempt to mediate the
relationship. After interviewing thirty-five Berkadia employees, the consultant
reported that while both Sherman and the production manager had room to improve
their respective job performance, the production team was able to maintain a high
level of productivity despite the manager’s weaknesses. Sherman’s underwriting
team, however, was underperforming, taking twice as long as the industry average to
process loan applications. The consultant attempted a number of strategies designed
to assist the two managers to work more efficiently together, but eventually conceded
that Sherman was “not driving the positive change he should be in the underwriting
group” and that he “c[a]me across as a leader who hates collaboration and wants
everyone . . . out of [his] hair.”

                                         -4-
       In May 2016 Sherman emailed Long, stating that it was “impossible” for him
to collaborate with the production manager. In a second email Sherman issued what
seemed to be an ultimatum, telling Long that if the production manager was
“envisioned to have a prominent management role in Berkadia’s vision for 2020 (or
even 2016), you should tee up the next Organizational Change Announcement with
my name.” Sherman noted around the same time period that he “couldn’t care less”
about what the production manager thought of him. He also admitted that his
relationship with Long was “in a bad place.”

      Sherman was terminated on October 13, 2016. In response to Sherman’s
written request for the reasons for termination, Long stated the decision was
performance based. In particular, Long noted Sherman’s unwillingness to collaborate
with other high-level managers, his habit of magnifying conflict, and his inability to
develop an underwriting team that met Berkadia’s expectations. Sherman asserts that
when Long initially informed him of his termination, Long stated that Sherman had
not “do[ne] [himself] any favors by going to the Executive Committee” regarding the
Rancho bridge loan.

      Sherman filed this suit on July 31, 2017, alleging retaliation under the FCA and
wrongful termination under Missouri law. He also brought a claim sounding in quasi-
contract. The district court granted Berkadia summary judgment on all claims. On
appeal, Sherman abandons his quasi-contractual claim, arguing error only as to the
court’s rulings on his FCA retaliation and wrongful-termination claims.

II. Discussion

      We review a grant of summary judgment de novo. Garrison v. Dolgencorp,
LLC, 939 F.3d 937, 940–41 (8th Cir. 2019). “Summary judgment is appropriate
when the evidence, viewed in a light most favorable to the nonmoving party, shows
no genuine issue of material fact exists and the moving party is entitled to judgment

                                         -5-
as a matter of law.” Spangler v. Fed. Home Loan Bank of Des Moines, 278 F.3d 847,
850 (8th Cir. 2002).

      A. FCA Retaliation

         The FCA “imposes liability on ‘[a]ny person who knowingly presents, or
causes to be presented, to an officer or employee of the United States Government .
. . a false or fraudulent claim for payment or approval.’” United States ex rel. Costner
v. United States, 317 F.3d 883, 886 (8th Cir. 2003) (quoting 31 U.S.C. § 3729(a)).
The statute also contains an anti-retaliation provision, which prohibits an employer
from terminating or otherwise retaliating against an employee for “lawful acts done
by the employee . . . in furtherance of [a civil action for false claims] or other efforts
to stop 1 or more violations of this subchapter.” 31 U.S.C. § 3730(h)(1); see also
Schuhardt v. Wash. Univ., 390 F.3d 563, 566–67 (8th Cir. 2004). In order to qualify
as protected activity under the FCA’s anti-retaliation provision, the employee’s
conduct: (1) “must have been in furtherance of an FCA action,” and (2) “must be
aimed at matters which are calculated, or reasonably could lead, to a viable FCA
action, meaning the employee in good faith believes, and . . . a reasonable employee
in the same or similar circumstances might believe, that the employer is possibly
committing fraud against the government.” Schell v. Bluebird Media, LLC, 787 F.3d
1179, 1187 (8th Cir. 2015) (internal quotation marks omitted).

       In order to avoid summary judgment on his FCA retaliation claim, Sherman
must provide either direct evidence of retaliation, or he must create an inference of
retaliation under the McDonnell Douglas burden-shifting framework. See Hutton v.
Maynard, 812 F.3d 679, 683 (8th Cir. 2016). “Direct evidence of retaliation is
evidence that demonstrates a specific link between a materially adverse action and the
protected conduct, sufficient to support a finding by a reasonable fact finder that the
harmful adverse-action was in retaliation for the protected conduct.” Young-Losee
v. Graphic Packaging Int’l, Inc., 631 F.3d 909, 912 (8th Cir. 2011). The “direct” in

                                           -6-
“direct evidence” denotes “the causal strength of the proof, not whether it is
‘circumstantial’ evidence.” Torgerson v. City of Rochester, 643 F.3d 1031, 1044 (8th
Cir. 2011). If direct evidence of retaliation exists, there is no need to resort to a
McDonnell Douglas analysis, and summary judgment must be denied. Id.

       Sherman contends that he has direct evidence of retaliation. As an example,
he cites Long’s comment about “going to the Executive Committee,” a reference to
Sherman’s assertion that he had been kept out of the loop on the Rancho Project.
While this may be direct evidence that Long was unhappy with Sherman’s decision
to circumvent the chain of command, circumventing the chain of command is not
protected conduct under the FCA. This is, therefore, not the kind of direct evidence
Sherman needs to survive summary judgment in this case. Nor is his other purported
direct evidence, consisting of statements by Long and others expressing their
disagreement with Sherman’s interpretation of HUD regulations. These statements
were made months before Sherman was fired and represent the kind of “stray remarks
in the workplace, statements by nondecisionmakers, or statements by decisionmakers
unrelated to the decisional process” that do not amount to direct evidence of
retaliation. Lors v. Dean, 746 F.3d 857, 866 (8th Cir. 2014) (quotation marks
omitted).

       When there is insufficient direct evidence of retaliation, we use the McDonnell
Douglas framework to judge the viability of FCA retaliation claims, the first step of
which requires Sherman to establish a prima facie case. United States ex rel. Strubbe
v. Crawford Cty. Mem’l Hosp., 915 F.3d 1158, 1168 (8th Cir. 2019). In order to
establish a prima facie case of FCA retaliation, Sherman must show “(1) [he] engaged
in protected conduct, (2) [Berkadia] knew [he] engaged in protected conduct, (3)
[Berkadia] retaliated against [him], and (4) the retaliation was motivated solely by
[Sherman’s] protected activity.” Id. (quotation marks omitted). If Sherman
establishes a prima facie case, the burden shifts to Berkadia to “articulate a legitimate
reason for the adverse action.” Id. (quotation marks omitted). Sherman must then

                                          -7-
show that the reason offered was a mere pretext and that, in fact, retaliatory animus
motivated the action. Id.

       The “motivated solely by” causal link required as part of the prima facie case
of a FCA retaliation claim is tighter than that required in other types of retaliation and
discrimination claims where we use the same McDonnell Douglas framework. See,
e.g., Pye v. Nu Aire, Inc., 641 F.3d 1011, 1021 (8th Cir. 2011) (noting that a Title VII
retaliation plaintiff must show as part of his prima facie case that “the adverse action
was causally linked to the protected conduct”); Kneibert v. Thomson Newspapers,
Mich. Inc., 129 F.3d 444, 454 (8th Cir. 1997) (“The [ADEA retaliation plaintiff] need
only show that the retaliatory motive was ‘a contributing factor’ as opposed to the
sole reason for the adverse employment action.” (quoting Wiehoff v. GTE Directories
Corp., 61 F.3d 588, 598 (8th Cir. 1995)); Danzl v. N. St. Paul-Maplewood-Oakdale
Indep. Sch. Dist. No. 622, 706 F.2d 813, 816 (8th Cir. 1983) (noting that a Title VII
sex-discrimination plaintiff “need not prove that her sex was the sole reason for the
challenged employment decision, but need only prove that sex was a factor in the
decision”).

       The record developed below fails to create a genuine issue of material fact as
to the existence of this tight causal link. While Sherman has produced evidence that
Berkadia management did not implement, and were at times critical of, some of his
suggestions regarding compliance with HUD regulations, there is also evidence that
Sherman’s supervisors disapproved of other parts of his job performance. The record
demonstrates, for example, that Berkadia was concerned about Sherman’s inability
to work with the production team manager and his history of accommodating
underwriters who continually produced work product at a much slower rate than the
industry average. Taken in the light most favorable to Sherman, this evidence would
not allow a reasonable jury to find that Berkadia fired Sherman solely for protected
activity. In other words, Sherman “has failed to make a sufficient showing on an
essential element of [his] case with respect to which [he] has the burden of proof.”

                                           -8-
Celotex Corp. v. Catrett, 477 U.S. 317, 323 (1986). Summary judgment was
appropriate as to his FCA retaliation claim. See United States ex rel. Strubbe, 915
F.3d at 1169 (affirming summary judgment on FCA retaliation claim, at least in part
because plaintiff “cannot prove that her termination was solely motivated by
protected activity”).

      B. Wrongful Discharge

       Under Missouri law there is a “very narrowly drawn” public-policy exception
to at-will employment that allows a terminated employee to bring a wrongful-
discharge claim. Margiotta v. Christian Hosp. Ne. Nw., 315 S.W.3d 342, 346 (Mo.
2010) (en banc). These claims exist only when the employee is terminated “(1) for
refusing to violate the law or any well-established and clear mandate of public policy
as expressed in the constitution, statutes, regulations promulgated pursuant to statute,
or rules created by a governmental body or (2) for reporting wrongdoing or violations
of law to superiors or public authorities.” Fleshner v. Pepose Vision Inst., P.C., 304
S.W.3d 81, 92 (Mo. 2010) (en banc).

       Sherman dedicates just two paragraphs in his opening brief spanning over sixty
pages to his wrongful-discharge claim under Missouri law. After stating the elements
of the claim, he concludes that “[t]he same arguments” he made as to his FCA
retaliation claim “support the reversal of summary judgment on the wrongful
discharge claim.” Sherman’s attempt at inclusion-by-reference briefing fails: An
FCA retaliation claim is based in federal statute, while a Missouri wrongful-discharge
claim is a common-law tort. The two claims have very different elements requiring
different analyses. In order to prove a wrongful-discharge claim based on his alleged
whistleblowing, Sherman had to show, among other things, that “he reported to
superiors or to public authorities serious misconduct that constitutes a violation of the
law and of . . . well established and clearly mandated public policy.” Margiotta, 315
S.W.3d at 347 (quoting Lynch v. Blanke Baer & Bowey Krimbo, Inc., 901 S.W.2d

                                          -9-
147, 150 (Mo. Ct. App. 1995)). “The pertinent inquiry here is whether the authority
clearly prohibits the conduct at issue in the action.” Id. Without meaningful
argument specific to wrongful discharge, Sherman has waived review of this claim.
See White v. Jackson, 865 F.3d 1064, 1075 (8th Cir. 2017) (“Because [appellant] has
not presented any ‘meaningful argument’ in his opening brief regarding his state law
claims . . . he has waived review of the district court’s decision on those claims.”).

       Even assuming his wrongful-discharge claim was not waived, none of the HUD
compliance issues Sherman raised internally during his tenure amount to “serious
misconduct” on the part of Berkadia or its employees. See Margiotta, 315 S.W.3d at
347 (quotation marks omitted). The evidence shows that Sherman made it his
mission to align the company’s conduct with his interpretation of HUD regulations.
Sherman’s efforts in this regard were mostly well-taken by his supervisors. But on
several occasions (whether the fallout from the failed Calabash Project, the increase
of the bridge loan on the Rancho Project, or the bright-line-rule policies Sherman
proposed) his colleagues disagreed either with his interpretation of HUD regulations
or the course of action he thought the company should take to remedy a possible
violation of those regulations. At no point has Sherman shown how Berkadia’s
activity violated “clearly mandated public policy.” Id. The record therefore does not
present a genuine issue of material fact as to whether Sherman fit Missouri’s “very
narrow[]” exception to at-will employment. Id. at 346. Summary judgment was
appropriate on Sherman’s wrongful-termination claim.

III. Conclusion

      We affirm the judgment of the district court.
                      ______________________________

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