Court Opinion

ID: 2997157
Source: CourtListenerOpinion
Date Created: 2015-09-24 19:34:14.394099+00
Date Added: 2024-06-11T11:45:32.079936
License: Public Domain

In the
 United States Court of Appeals
               For the Seventh Circuit
                          ____________

No. 03-1593
CARL E. THOMAS,
                                               Plaintiff-Appellant,
                                 v.

GUARDSMARK, INC.,
                                              Defendant-Appellee.

                          ____________
            Appeal from the United States District Court
       for the Northern District of Illinois, Eastern Division.
            No. 02 C 8848—Suzanne B. Conlon, Judge.
                          ____________
  ARGUED NOVEMBER 3, 2003—DECIDED AUGUST 27, 2004
                   ____________

 Before POSNER, DIANE P. WOOD, and EVANS, Circuit
Judges.
  DIANE P. WOOD, Circuit Judge. On November 16, 2001,
Guardsmark, Inc. indefinitely suspended its employee, secur-
ity officer Carl Thomas, after he suggested in a televised
interview that Guardsmark did not adequately screen its
employees for prior felony convictions. Almost a year later,
Thomas filed suit against Guardsmark, alleging retaliatory
discharge in violation of Illinois public policy. After remov-
ing to federal district court, Guardsmark successfully moved
for judgment on the pleadings pursuant to FED. R. CIV. P.
12(c). Guardsmark argued, and the district court agreed,
that Thomas was “effectively discharged” at the time he was
2                                                 No. 03-1593

suspended, and thus his action was barred by a six-month
limitations period found in his Employment Agreement with
Guardsmark. For the reasons discussed below, we reverse
and remand to the district court for development of the record
regarding Thomas’s employment status after Guardsmark
indefinitely suspended him in November 2001.

                               I
   In September 1998, Guardsmark hired Thomas to work
as a security officer for a CITGO oil refinery in Lemont,
Illinois. As a condition of his employment, Thomas signed
an Employment Agreement, which detailed the terms and
conditions of his employment. The Agreement specified that
“[e]xcept for charges or claims filed with the Equal
Employment Opportunity Commission or under any of the
statutes enforced by said agency, any legal action or pro-
ceeding related to or arising out of this Agreement or the
employment of Employee by Guardsmark must be brought
by Employee within six months of the date the cause of
action arose or it shall be time-barred.” It also provided that
Tennessee law would “govern the interpretation, validity,
and effect of this Agreement.” Thomas and a Guardsmark rep-
resentative signed the Agreement on September 21, 1998.
  In November 2001, an investigative reporter for a local news
station contacted Thomas in connection with a story about
regulation of the security industry in Illinois. In an on-camera
interview, Thomas stated that a fellow Guardsmark security
officer at the CITGO refinery had bragged about his felony
record. Thomas also opined that convicted felons should not be
trusted to provide security at installations that are likely
terrorist targets, such as oil refineries. The story was broad-
cast on November 8, 2001, and eight days later, Edward
Healy, Vice President and Manager of Guardsmark’s
Chicago office, informed Thomas that his employment was
indefinitely suspended because of his unauthorized inter-
No. 03-1593                                                  3

view with the news station. Since then, Guardsmark has not
compensated Thomas or allowed him to perform services for
the company.
   On October 31, 2002, Thomas filed a one-count complaint
against Guardsmark and Healy in the Circuit Court of Cook
County, alleging retaliatory discharge in violation of the
public policy of the State of Illinois. Guardsmark removed
to federal district court, arguing that Thomas, an Illinois
citizen, had improperly joined Healy, also an Illinois citizen,
and that full diversity would exist if the latter were dis-
missed. When Thomas filed suit, Guardsmark was a
Delaware corporation with its principal place of business in
Tennessee; by the time it filed its notice of removal, it had
converted into a limited liability corporation, with members
who are citizens of New York and Tennessee. See
Kanzelberger v. Kanzelberger, 782 F.2d 774, 776 (7th Cir.
1986) (providing that “diversity must exist both when the
suit is filed—as the statute itself makes clear, see 28 U.S.C.
§ 1441(a)—and when it is removed”). The court granted
Guardsmark’s motion to dismiss Healy and then denied
Thomas’s motion to remand. After filing its answer, to which
it attached the Employment Agreement, Guardsmark
moved for a judgment on the pleadings pursuant to FED. R.
CIV. P. 12(c). The court granted the motion, finding Thomas’s
claim barred by the six-month limitations period provided
in the Agreement. This appeal followed.

                              II
  As a preliminary matter, we briefly address Guardsmark’s
motion to strike, which asks that we disregard several pages
of Thomas’s supplemental appendix that were not included
in the record before the district court. These materials docu-
ment his efforts to access his Guardsmark 401(k) retirement
plan following his indefinite suspension. We deny
Guardsmark’s motion, on the ground that Thomas provided
4                                                 No. 03-1593

these materials not for evidentiary, but rather for illustra-
tive purposes—that is, not to establish the truth of their
contents, but to show that there might be a set of facts
consistent with his allegations in the complaint, such that
the Agreement’s six-month limitations period would not bar
his claim. In any event, as the discussion that follows
makes clear, we have not taken these documents into ac-
count in holding that Guardsmark cannot prevail on its
motion for judgment on the pleadings.
  We review de novo Rule 12(c) motions for judgment on the
pleadings. Midwest Gas Servs., Inc. v. Ind. Gas Co., 317 F.3d
703, 709 (7th Cir. 2003). Such a motion should be granted
“only if it appears beyond doubt that the plaintiff cannot
prove any facts that would support his claim for relief. In
evaluating the motion, we accept all well-pleaded allega-
tions in the complaint as true, drawing all reasonable in-
ferences in favor of the plaintiff.” Id. (internal citations and
quotation marks omitted); Forseth v. Vill. of Sussex, 199 F.3d
363, 368 (7th Cir. 2000) (“A complaint may not be dismissed
unless it is impossible to prevail under any set of facts that
could be proved consistent with the allegations.” (internal
quotation marks omitted)).
  Thomas presents three arguments in support of his posi-
tion that his retaliatory discharge claim is not barred by the
six-month limitations period provided in the Employment
Agreement. First, he contends that the Agreement does “not
constitute a binding and enforceable contract.” In order to
evaluate this point, we must determine what body of law
governs the validity of the Agreement. The Agreement itself
provides that Tennessee law “govern[s] the interpretation,
validity, and effect of this Agreement.” In a diversity case,
the federal court must apply the choice of law rules of the
forum state to determine applicable substantive law.
Klaxon Co. v. Stentor Elec. Mfg. Co., 313 U.S. 487, 496
(1941). Illinois respects a contract’s choice-of-law clause as
long as the contract is valid and the law chosen is not contrary
No. 03-1593                                                 5

to Illinois’s fundamental public policy. Fulcrum Fin. Partners
v. Meridian Leasing Corp., 230 F.3d 1004, 1011 (7th Cir.
2000). As an abstract matter, we see nothing in Illinois’s
choice-of-law rules that would preclude recognizing the
selection of Tennessee law on the question of the validity of
the contract. (No one is disputing that the Agreement
exists, or that both parties signed it.) Nonetheless,
Guardsmark concedes in its brief that “[u]ntil the district
court had determined that a valid contract containing a choice
of law clause existed, it was appropriate for the court to
apply Illinois law to the contract to determine the threshold
question of validity.” Appellee’s Brief at 9 n.4. This con-
cession makes it unnecessary for us to decide whether
Illinois or Tennessee law applies to this threshold issue, or
if those two laws differ in any material sense.
  Thomas argues that the Agreement is unenforceable both
because Guardsmark did not review and approve the
Agreement, as required by the Agreement itself, and because
the Agreement “create[d] no obligation on Guardsmark.”
Neither of these arguments is persuasive. The preamble of
the Agreement says that “[t]he Agreement shall not become
binding upon Guardsmark until reviewed and approved by
the Compliance Control Officer in Guardsmark’s Executive
Offices in Memphis, Tennessee.” Thomas asserts that “[t]here
is no evidence to show that Guardsmark ever fulfilled this
lone obligation,” but the record indicates otherwise.
Guardsmark attached to its answer to Thomas’s complaint
a document entitled, “Guardsmark: Personnel File Review,”
which lists Thomas’s name and date of hire. This document is
initialed by a “Selection Controller” and has a check next to
the heading “APPROVED.” Thomas nonetheless insists that
Guardsmark cannot rely on this document because its
“purpose and authenticity . . . is completely unexplained.”
See N. Ind. Gun & Outdoor Shows, Inc. v. City of South
Bend, 163 F.3d 449, 456 (7th Cir. 1998) (holding that, for
purposes of Rule 12(c), courts need not accept as legitimate
6                                                   No. 03-1593

“documents that do not by their nature imply some level of
credibility”). We need not verify this document’s authenticity
or otherwise confirm Guardsmark’s approval of Thomas’s
application, however, because “[p]arties to a contract have
the power to waive provisions placed in the contract for
their benefit and such a waiver may be established by
conduct indicating that strict compliance with the contrac-
tual provisions will not be required.” In re Liquidation of
Inter-Am. Ins. Co. of Ill., 768 N.E.2d 182, 193 (Ill. App. Ct.
2002). As Guardsmark’s approval of Thomas’s employment
application was exclusively for the company’s benefit,
Thomas cannot now use this term as a ground for invalidat-
ing the Agreement.
  Thomas also argues that the Agreement is invalid be-
cause “[t]here is simply nothing that Guardsmark agrees to
do in exchange for the many obligations it seeks to impose
on Mr. Thomas.” It is well-established that consideration
consists of some detriment to the offeror, some benefit to the
offeree, or some bargained-for exchange between them.
Doyle v. Holy Cross Hosp., 708 N.E.2d 1140, 1145 (Ill. 1999).
Under Illinois law, “[c]ontinued employment for a substan-
tial period of time is sufficient consideration to support an
employment agreement.” Lawrence & Allen, Inc. v. Cambridge
Human Res. Group, Inc., 685 N.E.2d 434, 441 (Ill. App. Ct.
1997); see also Schoppert v. CCTC Int’l, Inc., 972 F. Supp.
444, 447 (N.D. Ill. 1997) (stating that, under Illinois law, “con-
tinued performance is seen as both acceptance and consider-
ation” for an at-will employment agreement). Thomas’s
continued acceptance of the benefits of employment by
Guardsmark for three years after both parties signed the
Agreement constituted valid consideration for the legal de-
triment imposed by the terms of the Agreement.
  Thomas next argues that, even if the Agreement is a valid
contract, his claim is not barred because the six-month lim-
itations period is unenforceable. Under the terms of the
Agreement, the enforceability of this provision is governed
No. 03-1593                                                    7

by Tennessee law. As we have already noted, Illinois courts
respect a contractual choice-of-law clause if the contract is
valid, and the law chosen is not contrary to Illinois’s fun-
damental public policy. Fulcrum, 230 F.3d at 1011. In
addition, consistent with RESTATEMENT (SECOND) of CON-
FLICT of LAWS § 187 (1971), some Illinois courts have also re-
quired that “ ‘there be some relationship between the chosen
[law] and the parties or the transaction.’ ” See, e.g.,
Mastrobuono v. Shearson Lehman Hutton, Inc., 20 F.3d 713,
719 (7th Cir. 1994) (quoting Potomac Leasing Co. v. Chuck’s
Pub, Inc., 509 N.E.2d 751, 754 (Ill. App. Ct. 1987)), rev’d on
other grounds, 514 U.S. 52 (1995); Newell Co. v. Petersen,
758 N.E.2d 903, 922 (Ill. App. Ct. 2001); Int’l Surplus Lines
Ins. Co. v. Pioneer Life Ins. Co. of Ill., 568 N.E.2d 9, 14 (Ill.
App. Ct. 1990).
   Neither Guardsmark nor Thomas suggests that Tennessee
law upholding contractual limitations periods is contrary to
Illinois’s public policy, as both states have routinely upheld
contractual provisions shortening a limitations period other-
wise provided by statute. See Taylor v. W. & S. Life Ins. Co.,
966 F.2d 1188, 1203 (7th Cir. 1992) (“[C]ontractual limita-
tions of action are generally upheld under Illinois law.”);
United States v. Republic Ins. Co.,775 F.2d 156, 160 (6th
Cir. 1985) (“In Tennessee, limitation of action clauses have
long been upheld as long as a reasonable period of time is
provided [for bringing suit].” (internal quotation marks
omitted)). Furthermore, under Illinois law, the sufficient
relationship requirement is generally satisfied when the
contractual choice of law is that of the state in which one of
the parties is headquartered. See Mastrobuono, 20 F.3d at
719 (applying Illinois conflicts law, state of principal place
of business was reasonable for choice of law provision); Newell
Co., 758 N.E.2d at 922 (same). As Guardsmark’s principal
place of business is Tennessee, the sufficient relationship
requirement is satisfied, and Tennessee law therefore
governs the enforceability of the Agreement’s limitations
period.
8                                                 No. 03-1593

   In Tennessee, “it is a well established general rule that in
the absence of a prohibitory statute, a contract provision is
valid which limits the time for bringing suit, if a reasonable
period of time is provided, and that the general statutes of
limitations are not prohibitory of such contractual provi-
sions as between private individuals or corporations.” State
v. Evans, 334 S.W.2d 337, 342 (Tenn. Ct. App. 1959); see
also Republic Ins. Co., 775 F.2d at 160 (same); Webb v. Ins.
Co. of N. Am., 581 F. Supp. 244, 250 (W.D. Tenn. 1984)
(same); Hill v. Home Ins. Co., 125 S.W.2d 189, 192 (Tenn.
Ct. App. 1938) (“Contractual limitations . . . are valid and
enforceable.”); cf. Irving Pulp & Paper, Ltd. v. Dunbar
Transfer & Storage Co., 732 F.2d 511, 514 (6th Cir. 1984)
(defendant equitably estopped from relying on contractual
limitations defense where it misled plaintiff by initially
admitting liability but later recanting, causing plaintiff to
file suit after limitations period expired). As Thomas points to
no statute prohibiting the Agreement’s six-month limita-
tions period and does not suggest that this period was per
se unreasonable, we find the limitations period enforceable
under Tennessee law.
  We turn, then, to Thomas’s final argument: that his retal-
iatory discharge claim is not barred by the Agreement’s
limitations period because his cause of action did not arise
more than six months before he filed suit. Illinois law
governs our analysis of this issue, because it relates to an
aspect of the statute of limitations not addressed in the
agreement. A federal court sitting in diversity must follow
the statute of limitations that the state in which it is sitting
would use. See Guaranty Trust Co. v. York, 326 U.S. 99, 110
(1945). Illinois considers statutes of limitations to be
procedural questions governed by the law of the forum. See
Belleville Toyota, Inc. v. Toyota Motor Sales, U.S.A., Inc.,
770 N.E.2d 177, 194 (Ill. 2002). We therefore turn to Illinois
law to decide when Thomas’s claim accrued; we add compar-
isons to Tennessee law to illustrate the point that the same
result is likely no matter which state’s law is used.
No. 03-1593                                                      9

  In general, Illinois courts hold that “a limitations period
begins to run when facts exist that authorize one party to
maintain an action against another.” Feltmeier v. Feltmeier,
798 N.E.2d 75, 85 (Ill. 2003); see Ind. Ins. Co. v. Machon &
Machon, Inc., 753 N.E.2d 442, 445 (Ill. App. Ct. 2001).
According to Guardsmark, Thomas was in possession of
such facts on November 16, 2001, which it characterizes as
the effective date of his discharge. As of that date, Thomas
was indefinitely suspended without pay. If it is the relevant
date to use, then his claim is barred because he did not file
suit until almost a year later, on October 31, 2002. The
district court agreed with Guardsmark’s argument, citing
Vector-Springfield Properties, Ltd. v. Central Ill. Light Co.,
108 F.3d 806, 809 (7th Cir. 1997), for the proposition that
“tort claims, like retaliatory discharge, accrue when the
plaintiff ‘became possessed of sufficient information con-
cerning [his] injury to put a reasonable person on inquiry to
determine whether actionable conduct was involved.’ ” The
court found Thomas’s claim untimely because he “should
have realized shortly after November 16, 2001 that
Guardsmark effectively terminated his employment.”
  The problem with this position is that only an actual ter-
mination can support an employee’s retaliatory discharge
claim under Illinois law. In the closely related area of dis-
criminatory termination cases, the Tennessee Supreme
Court has held that a discriminatory discharge is complete
“when the plaintiff is given unequivocal notice of the em-
ployer’s termination decision, even if employment does not
cease until a designated date in the future.” Weber v. Moses,
938 S.W.2d 387, 391-92 (Tenn. 1996). In Illinois, a plaintiff
states a claim for retaliatory discharge “only if she alleges
that she was (1) discharged; (2) in retaliation for her activities;
and (3) that the discharge violates a clear mandate of public
policy.” Zimmerman v. Buchheit of Sparta, Inc., 645 N.E.2d
877, 880 (Ill. 1994) (internal quotation marks omitted).
“Discharge in an employment context is commonly under-
10                                                No. 03-1593

stood to mean the release, dismissal, or termination of an
employee.” Welsh v. Commonwealth Edison, 713 N.E.2d
679, 683 (Ill. App. Ct. 1999) (citing WEBSTER’S THIRD NEW
INTERNATIONAL DICTIONARY 644 (1993); BLACK’S LAW
DICTIONARY 463 (6th ed. 1990)).
   The Illinois Supreme Court “has consistently sought to re-
strict the common law tort of retaliatory discharge.” Fisher v.
Lexington Health Care, Inc., 722 N.E.2d 1115, 1121 (Ill.
1999). In particular, the court “has thus far declined to
recognize a cause of action for retaliatory constructive dis-
charge.” Id.; see also Buckner v. Atl. Plant Maint., Inc., 694
N.E.2d 565, 569 (Ill. 1998) (noting the Illinois Supreme
Court’s “past precedent admonishing against the expansion of
this tort”); Zimmerman, 645 N.E.2d at 882 (“Illinois courts
have refused to accept a ‘constructive discharge’ concept.”);
Graham v. Commonwealth Edison Co., 742 N.E.2d 858, 864
(Ill. App. Ct. 2000) (“The tort of retaliatory discharge does
not encompass any behavior other than actual termination
of employment.”). On this basis, Illinois courts have held
that an employee’s suspension does not qualify as a “dis-
charge” for purposes of a retaliatory discharge action and
has therefore rejected such claims. See, e.g., Melton v. Cent.
Ill. Pub. Serv. Co., 581 N.E.2d 423, 425-26 (Ill. App. Ct. 1991)
(denying plaintiffs’ request that the court “expand the
notion of retaliatory discharge to cases . . . where the
employer takes disciplinary action short of discharge, such
as the suspension of one of the plaintiffs in this case”).
While Tennessee has taken a somewhat more liberal view
of retaliatory constructive discharge, it has focused on the
situation in which conditions have become so intolerable for
the employee that the employee’s abandonment of the job is
equivalent to a discharge, not the situation in which the
employer gives ambiguous signals to the employee about the
continued status of his employment. See Crews v. Buckman
Laboratories Int’l, Inc., 78 S.W.3d 852, 865 (Tenn. 2002).
Compare Pa. State Police v. Suders, 124 S.Ct. 2342, 2354
No. 03-1593                                                11

(2004) (constructive discharge plaintiff “must show working
conditions so intolerable that a reasonable person would
have felt compelled to resign”).
  In light of these decisions, we decline to find Thomas’s re-
taliatory discharge claim barred on the theory that
Guardsmark’s action in November 2001 was equivalent to
a discharge. Such a holding would contravene Illinois law,
see Prince v. Rescorp Realty, 940 F.2d 1104, 1107 (7th Cir.
1991), and it would disregard the requirement in Tennessee
law of an “unequivocal” notice of a termination. It would
invite employers to manipulate their communications with
employees so as to avoid liability. Rather than fire employ-
ees and risk a retaliatory discharge action, employers would
have an incentive indefinitely to “suspend” them in the
hope that they will not realize that they have been dis-
charged until after the limitations period has expired. See
Hinthorn v. Roland’s of Bloomington, Inc., 519 N.E.2d 909,
912 (Ill. 1988) (emphasizing that “an employer cannot
escape responsibility for an improper discharge simply
because he never uttered the words ‘you’re fired’ ”). We also
recognize, however, that substance should prevail over
form, and if Thomas’s indefinite suspension was or became
an actual discharge, the contractual limitations period
would begin to run at that point. See id. (“So long as the
employer’s message that the employee has been involun-
tarily terminated is clearly and unequivocally communi-
cated to the employee, there has been an actual discharge,
regardless of the form such discharge takes.”). Thomas must
therefore tread a thin line: On the one hand, he can avoid
the Agreement’s limitations period only if his indefinite
suspension in November 2001 did not constitute an actual
discharge. On the other hand, he must establish that, at
some point prior to his filing suit in October 2002, his
suspension was converted into an actual discharge, such
that he can now state a retaliatory discharge claim.
12                                               No. 03-1593

  Because this case comes to us on a Rule 12(c) motion for
judgment on the pleadings, we lack sufficient information
to determine when, if ever, Thomas’s indefinite suspension
became an actual discharge. Discovery might reveal more
about Guardsmark’s corporate practices with respect to
indefinite suspensions, including whether such a suspen-
sion is the equivalent of a discharge because no suspended
employee is in fact ever recalled. In addition, Guardsmark’s
employee and insurance records and information regarding
Thomas’s access to the funds in his 401(k) retirement plan
might assist in clarifying Thomas’s employment status
during the period between November 2001 and October
2002. While this case may ultimately prove appropriate for
summary judgment, Guardsmark cannot prevail as a mat-
ter of law at this stage in the proceedings, given that a dis-
puted question of fact remains as to whether Thomas was
discharged and, if so, when he was.

                             III
  As it is not beyond doubt that Thomas will be unable to
prove any facts that would support his claim for relief, we
REVERSE the district court’s judgment for Guardsmark and
REMAND for proceedings consistent with this opinion.
No. 03-1593                                         13

A true Copy:
      Teste:

                    ________________________________
                    Clerk of the United States Court of
                      Appeals for the Seventh Circuit

               USCA-02-C-0072—8-27-04