Court Opinion

ID: 3023503
Source: CourtListenerOpinion
Date Created: 2015-10-13 22:29:06.620003+00
Date Added: 2024-06-11T11:47:37.487860
License: Public Domain

United States Court of Appeals
                          FOR THE EIGHTH CIRCUIT
                                   ___________

                                   No. 98-3707
                                   ___________

Yvonne L. Regel; Shirley A. Devries,    *
                                        *
            Appellants,                 *
                                        * Appeal from the United States
      v.                                * District Court for the
                                        * Northern District of Iowa.
K-Mart Corporation,                     *
                                        *
            Appellee.                   *
                                   ___________

                             Submitted: June 18, 1999
                                 Filed: September 9, 1999
                                  ___________

Before BOWMAN and HEANEY, Circuit Judges, and LONGSTAFF,1 District Judge.
                          ___________

BOWMAN, Circuit Judge.

       Yvonne E. Regel and Shirley A. Devries appeal the grant of summary judgment
in favor of their former employer, K-Mart Corporation, on their claims of age
discrimination and interference with employment benefits. We affirm.

      Regel and Devries worked at a K-Mart store in Charles City, Iowa, until they
both were discharged in May 1995. At the time they were discharged, Regel was sixty-

      1
        The Honorable Ronald E. Longstaff, Chief Judge, United States District Court
for the Southern District of Iowa, sitting by designation.
two years old and had worked for K-Mart for almost eleven years, and Devries was
fifty-five years old and had been employed by K-Mart for about thirteen years. Both
were full-time employees entitled to various employee benefits such as health insurance
and retirement benefits.

       Regel and Devries sued K-Mart contending they were terminated on account of
their age in violation of the Age Discrimination in Employment Act (ADEA), 29 U.S.C.
§ 623(a) (1994), and Iowa Code § 216.6 (1994). They also claimed that K-Mart
terminated their employment in an intentional effort to interfere with their employment
benefits in violation of the Employee Retirement Income Security Act (ERISA), 29
U.S.C. § 1140 (1994). We apply the same analysis to the appellants' age discrimination
claims under the ADEA and under Iowa Code § 216.6. See Sievers v. Iowa Mut. Ins.
Co., 581 N.W.2d 633, 635, 638-39 (Iowa 1998); see also Bialas v. Greyhound Lines,
Inc., 59 F.3d 759, 762-63 (8th Cir. 1995).

       According to K-Mart, Regel and Devries were terminated as a result of a
reduction in force (RIF). In early 1995, K-Mart began experiencing severe financial
difficulties, which it addressed by closing more than 200 unprofitable stores and by
mandating that each store operate within its own budget. In May 1995, the Charles
City store was exceeding its salary budget by about $10,000, an amount greater than
any previous budget deficit, and the store was showing operational losses of $44,000.
In prior years, budgetary compliance was restored by terminating part-time personnel
or by seeking a voluntary reduction of hours by full-time personnel. In addition, the
Regional Manager, Anthony Franco, had transferred money to the store to alleviate
over-budget problems, but in 1995 K-Mart prohibited this practice.

       The Manager of the Charles City store, Peter Spinks, sought Franco's assistance
in rectifying the over-budget situation that existed in May 1995. Franco determined
that a RIF was necessary and that eliminating two full-time positions would produce
the necessary reduction in salary expenditures. Franco first considered eliminating the

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two least senior full-time employees, but this would have eliminated a skilled position
that was necessary to the operation of the store. Franco, in consultation with the
Regional Human Resources Director, decided on a RIF procedure that would eliminate
the two least senior full-time employees among all of the non-skilled positions,
believing that this would save training costs and less detrimentally impact store
functions. Spinks and the store's Human Resources Manager, Yvonne Kisch, applied
this RIF procedure and discharged Regel and Devries. According to Franco and
Spinks, the ages and identities of the employees were not known until after the RIF
procedure was implemented. Franco and Spinks have stated that they focused solely
on reducing the store's salary expenditures and not on the RIF's impact on benefit
expenses.

      This Court reviews a grant of summary judgment de novo, applying the same
standards as the district court. See Young v. Warner-Jenkinson Co., 152 F.3d 1018,
1021 (8th Cir. 1998). We will affirm the grant of summary judgment "if the evidence,
viewed in the light most favorable to the nonmoving party, demonstrates that no
genuine issue of material fact exists and that the moving party is entitled to judgment
as a matter of law." Id.; see also Fed. R. Civ. P. 56(c).

       Because Regel and Devries have presented no direct evidence of age
discrimination, we apply the burden-shifting analysis of McDonnell Douglas Corp. v.
Green, 411 U.S. 792 (1973). See Hindman v. Transkrit Corp., 145 F.3d 986, 990-91
(8th Cir. 1998); Bashara v. Black Hills Corp., 26 F.3d 820, 823 (8th Cir. 1994). First,
the plaintiff must establish a prima facie case of age discrimination.2 If the plaintiff
makes a prima facie showing, the burden shifts to the defendant to articulate a
legitimate, nondiscriminatory reason for the discharge. If the defendant meets this

      2
       The parties dispute the exact factors comprising the prima facie case, but we
assume, without deciding, that Regel and Devries have established a prima facie case
for purposes of this appeal.
                                          -3-
burden, the plaintiff must prove that the defendant's reason is merely a pretext for
unlawful discrimination. It was on this third step of the McDonnell Douglas analysis
that the District Court3 granted summary judgment to K-Mart, finding that Regel and
Devries had not produced evidence from which a jury reasonably could find that
K-Mart's articulated reason was merely a pretext for discrimination.

      Although we are doubtful that Regel and Devries have established a prima facie
case of age discrimination, we will assume that they have done so for purposes of this
appeal. We, like the District Court, find that K-Mart has provided a legitimate,
nondiscriminatory reason for the discharges, the RIF. Regel and Devries therefore can
avoid summary judgment only if they present evidence that creates a question of
material fact as to whether K-Mart's proffered reason is pretextual and that creates a
reasonable inference that age was a determinative factor in K-Mart's decision to
discharge them. See Hindman, 145 F.3d at 991.

        The appellants challenge K-Mart's stated reason for their discharges by arguing
that there was no need for a RIF. Regel and Devries argue that K-Mart knew its
employment would increase during the approaching busy seasons of fall and winter and
after construction was completed on the new and larger K-Mart store in Charles City.
They contend that K-Mart's employment needs, and its salary budget, were increasing
at the time of their discharges as shown by the twelve part-time employees hired during
May, June, July, and August 1995.4 Regel and Devries assert that they should have

      3
      The Honorable Edward J. McManus, United States District Judge for the
Northern District of Iowa.
      4
       According to Kisch, all but one of these part-time employees replaced
employees who had resigned, and the money saved by the elimination of the appellants'
positions was used to reduce the over-budget situation and not to hire additional part-
time employees. The appellants offer no evidence to refute this.
                                          -4-
been given an opportunity to modify their work schedules or reduce their hours rather
than being discharged if K-Mart truly wanted to save training costs.

       Regel and Devries do not dispute that K-Mart as a whole was facing financial
difficulties in 1995. K-Mart required the Charles City store to reduce its budget deficit,
and management made a business decision to reduce the store's work force. K-Mart
used only objective criteria based on the store's needs and not on individual
assessments of employees. The appellants' arguments are nothing more than an attack
on K-Mart's business decision to implement a RIF. A company's exercise of its
business judgment "is not a proper subject for judicial oversight." Bashara, 26 F.3d at
825. "[T]he employment-discrimination laws have not vested in the federal courts the
authority to sit as super-personnel departments reviewing the wisdom or fairness of the
business judgment made by employers, except to the extent that those judgments
involve intentional discrimination." Herrero v. St. Louis Univ. Hosp., 109 F.3d 481,
485 (8th Cir. 1997) (quoting Hutson v. McDonnell Douglas Corp., 63 F.3d 771, 781
(8th Cir. 1995)). Though Regal and Devries challenge the financial need for a RIF,
when a company exercises its business judgment in deciding to reduce its work force,
"it need not provide evidence of financial distress to make it a 'legitimate' RIF." Hardin
v. Hussmann Corp., 45 F.3d 262, 265 (8th Cir. 1995).

        The appellants' argument that the District Court failed to acknowledge their
evidence allegedly showing that Spinks and Kisch had exhibited age bias is meritless,
because neither Spinks nor Kisch was the decision-maker in this case. Franco decided
to institute a RIF and chose the method used, and the appellants have not offered any
evidence of age bias on the part of Franco. The appellants also argue that the District
Court failed to consider their contention that K-Mart did not follow its work-force-
reduction guidelines, which requires management first to examine part-time staffing and
then to ask full-time employees voluntarily to reduce their hours. The record, however,
shows that K-Mart did not ignore its guidelines. The store's management determined
that no additional part-time employees could be eliminated without harming store

                                           -5-
operations, and rejected a voluntary reduction of hours because of the large over-
budget amount and because of past negative experiences (as well as limited financial
success) with such a procedure. No inference of age discrimination reasonably can be
drawn from these facts.

       Regel and Devries point out that the average age of the new part-time employees
hired by K-Mart during 1995 was about thirty. They argue that K-Mart's goal was to
eliminate older, full-time employees and that the RIF achieved that result. This
argument fails, however, because they have not shown a connection between their
discharges and age discrimination. We have examined the decision-making process
and find no evidence that age played a role in Franco's decision to institute a RIF or in
the method chosen to implement the RIF. Having reviewed the record and considered
the appellants' arguments, we find no basis for reversing the District Court's grant of
summary judgment to K-Mart on the age discrimination claims.

       Regel and Devries also claim that K-Mart discharged them in order to
purposefully interfere with their employment benefits. ERISA provides that "[i]t shall
be unlawful for any person to discharge, fine, suspend, expel, discipline, or discriminate
against a participant or beneficiary . . . 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. The same burden-shifting analysis we applied to the appellants' ADEA claims
also applies to their ERISA claims. See Jefferson v. Vickers, Inc., 102 F.3d 960, 964
(8th Cir. 1996); Rath v. Selection Research, Inc. 978 F.2d 1087, 1089 (8th Cir. 1992).

       Assuming that Regel and Devries have established a prima facie case of
discrimination in violation of 29 U.S.C. § 1140, we agree with the District Court that
K-Mart has articulated a legitimate, nondiscriminatory reason for discharging the
appellants, the RIF. To overcome K-Mart's nondiscriminatory reason for their
discharges, Regel and Devries must prove that K-Mart's proffered reason is pretextual

                                             -6-
by presenting evidence that K-Mart acted with specific intent to interfere with their
rights. See Jefferson, 102 F.2d at 964. "This specific intent can be shown with
circumstantial evidence, but must be more specific than mere conjecture." Id.

       Regel and Devries again argue that this was not, in reality, a RIF. According to
Regel and Devries, K-Mart wanted to reduce benefit expenses by replacing older, full-
time employees with younger, part-time employees who were entitled to fewer benefits.
They assert that given the overall increase in employment and the inefficiencies of
hiring inexperienced part-time workers, the only category in which the Charles City
K-Mart store actually would have saved money by terminating their employment was
in the category of employee benefits. They therefore argue that K-Mart terminated
them to avoid paying ERISA-protected benefits.

       The appellants have failed to produce evidence showing that K-Mart
intentionally interfered with their ERISA rights. Their arguments are speculative and
are merely another attack on K-Mart's business judgment. Franco, the decision-maker
in this case, has stated that he looked only at the salary budget in deciding to institute
a RIF and not at the separate benefits budget. Regel and Devries have not produced
any evidence that interference with their ERISA-protected benefits was a motivating
factor in their discharges and thus have not shown the requisite specific intent. This
case is similar to Morris v. Winnebago Industries, Inc., in which the district court found
that the employer terminated the plaintiff in order to rectify its current budget problems,
and concluded that it was the employee's salary, not his benefits, that was considered
in deciding to terminate the employee. See 950 F. Supp. 918, 926 (N.D. Iowa 1996);
see also Conkwright v. Westinghouse Elec. Corp., 933 F.2d 231, 239 (4th Cir. 1991)
("[Plaintiff's] suggestion that [the employer] acted illegally because it acted to save
money proves too much. Under that reasoning, any actions by an employer that result
in savings would be suspect. It is obvious that benefit costs make up a large amount
of the costs of an employee to a company, . . . but [this] undeniable proposition[] [is]
not sufficient standing alone to prove the requisite intent by the path of pretext.").

                                            -7-
Based on our review of the record, we conclude that any interference with Devries and
Regel's ERISA benefits "was merely 'incidental' to an adverse employment action
motivated by a need to cut costs." Morris, 950 F. Supp. at 927. The District Court
correctly granted summary judgment to K-Mart on appellants' ERISA claims.

      The judgment of the District Court is affirmed.

      A true copy.

             Attest:

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

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