Court Opinion

ID: 3018459
Source: CourtListenerOpinion
Date Created: 2015-10-13 22:19:13.048286+00
Date Added: 2024-06-11T11:47:09.980744
License: Public Domain

United States Court of Appeals
                   FOR THE EIGHTH CIRCUIT

                        ___________

                        No. 96-2294
                        ___________

Keith Birchem,              *
                            *
    Plaintiff - Appellant, *
                            *    Appeal from the United
States
    v.                      * District Court for the
                            * District of North Dakota.
Knights of Columbus;        *
Daniel N. Wentz,            *
                            *
    Defendants - Appellees.   *
                      ___________

                 Submitted:   February 13, 1997

                     Filed:        May 30, 1997
                       ___________

Before MAGILL, BEAM, and LOKEN, Circuit Judges.
                      ___________

LOKEN, Circuit Judge.

    Terminated insurance agent Keith Birchem appeals the
dismissal of his claims for disability discrimination,
breach   of   contract,    retaliatory      discharge,   and
intentional
infliction of emotional distress.              The district court1
granted summary judgment primarily on the ground that
Birchem was an independent contractor, not an employee.
We affirm.

     Knights of Columbus (“KOC”) is a non-profit fraternal
benefit society that offers life insurance and annuities
to members of the Catholic Church.             Daniel N. Wentz is
KOC’s general insurance agent in eastern North Dakota.
In July 1988, Wentz appointed Birchem a KOC field agent,
granting him the exclusive right to sell KOC policies to
members of four Catholic churches.             The appointment was
reflected in a Field Agent Contract between KOC, Wentz,
and Birchem.     The contract was renewed in 1990 and 1992.

     During two of his years as a KOC field agent, Birchem
was Wentz’s lowest producer, and Birchem never placed
better than sixth out of eight Wentz agents in overall
performance.      Even in his best year, Birchem received a
letter from KOC warning that his production had fallen
below the minimum needed to retain pension and health
benefits.    Two agents with performance histories similar
to Birchem’s resigned during this period.             In    the summer
of   1992,   Birchem    began    looking    for   a   new    position,

     1
        The HONORABLE RODNEY S. WEBB, Chief Judge of the United States
District Court for the District of North Dakota.
                                  -2-
speaking with general agents for several other insurers
and investigating the purchase of an independent agency.

    That fall, the Wentz field agents attended a joint
conference with KOC agents from Minnesota.   Birchem told
other field agents that Wentz was encouraging agents

                          -3-
to engage in improper competitive practices.                        Birchem
also said that he no longer wished to work for Wentz and
was looking for another position.                Wentz and Birchem met
on October 12 to discuss Birchem’s comments.                        Birchem
told Wentz that he felt uncomfortable coming to the
office and had lost all respect for Wentz because of his
marketing practices.              Wentz said that he felt that his
relationship with Birchem was irretrievably damaged.                      In
early November, Wentz told Birchem to resign or be fired.
Birchem resigned on November 5 and began working for a
competing insurer one month later.

    Birchem      filed       this       wrongful      termination      suit,
claiming      that     he   was     constructively         discharged     in
violation of the Americans with Disabilities Act, 42
U.S.C. § 12112 (“ADA”), and the North Dakota Human Rights
Act, N.D.C.C. § 14-02.4-03(i) (“NDHRA”), because Wentz
would   not    accommodate          Birchem’s        disability,    bipolar
disorder or manic depression.                   Birchem also asserted
pendent claims for unlawful retaliation, because Birchem
had accused Wentz of improper trade practices; breach of
an oral contract not to terminate the written Field Agent
Contract    so   long       as    Birchem      met    minimum    production
objectives;      and    intentional           infliction    of    emotional
distress.
    At the close of discovery, KOC and Wentz moved for
summary    judgment.             Both   sides    filed     extensive    fact
submissions.         At the motion hearing, the district court

                                        -4-
raised an issue not briefed by the parties -- whether
field agent Birchem was an employee or an independent
contractor.     The    parties     submitted     additional    fact
materials on that issue, and the court then granted
summary   judgment    in   favor     of   both   defendants.     It
concluded that Birchem was an independent contractor and
therefore not protected by the ADA, the NDHRA, or the
North Dakota public policy against retaliatory discharge

                               -5-
of a whistleblower.              Alternatively, the court concluded
that Birchem has no evidence of a pretextual discharge.
It dismissed his contract claim because the Field Agent
Contract was terminable at will and may not be varied by
Wentz’s prior oral representations.                        Finally, the court
held    that      Birchem    could       not     prove      the     “extreme      and
outrageous conduct” necessary for a claim of intentional
infliction of emotional distress.                         Birchem appeals each
of those rulings.

                       I. Birchem’s ADA Claim.

       A.   The    Employee      Issue.        Like       Title    VII,     the   ADA
protects “employees” but not independent contractors.
See Wilde v. County of Kandiyohi, 15 F.3d 103, 104 (8th
Cir.    1994).       The     Act      defines        an    “employee”       as    “an
individual        employed       by     an     employer.”           42    U.S.C.    §
12111(4).      When Congress uses this “completely circular”
definition, courts apply the general common law of agency
to     distinguish          between          protected            employees       and
unprotected independent contractors.                             Nationwide Mut.
Ins. Co. v. Darden, 503 U.S. 318, 323 & n.3 (1992).

       In   applying       the   common        law    of    agency       test,    the
Supreme Court looks at the large number of factors that
define the parties’ total contractual relationship, no
one    of   which     is    determinative.                 See     Community      for
Creative       Non-Violence        v.    Reid,       490 U.S. 730,    751-53

                                         -6-
(1989), followed in Darden, 503 U.S. at 323-324.                   The
Court “typically weighs the common-law factors listed in
the Restatement [(Second) of Agency § 220(2) (1958)] and
some additional factors related to the worker’s economic
situation,      like   how    the      work   relationship   may    be
terminated, whether the worker receives yearly leave,
whether   the    worker      accrues      retirement   benefits,   and
whether the hiring party

                                    -7-
pays social security taxes.”                  Wilde, 15 F.3d at 105.            We
review the ultimate question of employment status de
novo.       See Berger Transfer & Storage v. Central States,
S.E. & S.W. Areas Pension Fund, 85 F.3d 1374, 1378 (8th
Cir. 1996).

      We agree with the district court that Birchem and KOC
had an independent contractor relationship.                        First, each
Field Agent Contract expressly provided that “[n]othing
contained in this Agreement shall be construed to create
the relationship of employer and employee between” KOC
and       Birchem,    KOC    and    Wentz,      or    Wentz    and     Birchem.2
Second,      the     parties’      financial         relationship      strongly
suggests Birchem was an independent contractor.                           He was
paid on a commission basis, KOC did not withhold income
taxes from his commissions, and Birchem reported his KOC
earnings as income of a self-employed individual for
federal tax purposes.              Third, the unrefuted affidavit of
a Vice President in KOC’s Agency Department averred that
KOC does not control a field agent’s daily activities.
Finally,      federal       courts     have     consistently         held    that
insurance agents are unprotected independent contractors,
and Birchem has cited no contrary authority.                         See, e.g.,
Oestman v. National Farmers Union Ins. Co., 958 F.2d 303

      2
       Consistent with this provision, the Contract permitted Birchem “to exercise
independent judgment as to the eligible persons from whom applications for
insurance will be solicited, and as to the time and place of such solicitation.”
                                        -8-
(10th Cir. 1992) (ADEA); Knight v. United Farm Bureau
Mut. Ins. Co., 950 F.2d 377 (7th Cir. 1991) (Title VII);
United States EEOC v. Catholic Knights Ins. Soc’y, 915 F.
Supp.    25   (N.D.   Ill.   1996)    (Title   VII);   Robinson   v.
Bankers Life & Cas. Co., 899 F. Supp. 848 (D.N.H. 1995)
(ADA).    Although some aspects of KOC’s relationship with
its field agents would be consistent with employment, the
balance of factors clearly supports the district court’s
independent contractor determination.

                                -9-
       Birchem asserts his ADA claim against Wentz, as well
as   KOC.     Because Wentz and his general agency were
independent    of    KOC,   Wentz   might    have   been    Birchem’s
employer even if KOC was not.             An important factor in
determining employee status is “[t]he hiring party’s
right to control the manner and means of the worker’s
product,” that is, the extent to which Wentz directed and
controlled Birchem’s day-to-day activities as a KOC field
agent.      Wilde, 15 F.3d at 105.           Birchem submitted an
affidavit with supporting documents detailing Wentz’s
extensive day-to-day direction and control.                Defendants
submitted nothing from Wentz refuting these averrals, and
Wentz’s deposition is laced with language suggesting an
employee     relationship.          The     district      court    only
addresszed the employee question from the perspective of
Birchem’s relationship with KOC.             We conclude that the
summary     judgment   record   raises       a   genuine    issue    of
material fact as to whether Birchem was Wentz’s employee
for ADA purposes.       Thus, we must turn to the district
court’s alternative ground for granting summary judgment
in favor of Wentz.

       B. The Pretext Issue.    In late 1991, when Birchem was
diagnosed with bipolar disorder, he advised Wentz that he
was taking lithium to stabilize his mood swings.              Birchem
continued to work and did not ask Wentz to accommodate
this    condition.     However,     he    now    argues    that   Wentz
violated the ADA by taking adverse employment action

                                -10-
because of this disability.         Lacking direct evidence of
disability discrimination, Birchem must avoid summary
judgment   on   this   claim   by   using   the   burden-shifting
framework of St. Mary’s Honor Center v. Hicks, 509 U.S.
502 (1993).     See Price v. S-B Power Tool, 75 F.3d 362,
364-65 (8th Cir.), cert. denied, 117 S. Ct. 274 (1996).
The district court assumed that Birchem could make out a
prima facie case under the ADA but concluded that he had
no evidence that Wentz’s nondiscriminatory business

                               -11-
reasons    for     demanding      Birchem’s         resignation     were    a
pretext for disability discrimination.                   We agree.

       Birchem    alleges    that     Wentz’s       stated     reasons    for
termination       were    that    Birchem       “could    no     longer    be
trusted” -- what Wentz called the irretrievable breakdown
in their working relationship -- and because Birchem did
not meet KOC’s minimum production requirements after two
years as a field agent.               These are business reasons
having nothing to do with Birchem’s alleged disability.
As evidence of pretext, Birchem points to the fact that
KOC renewed his Field Agent Contract in July 1992, and to
the fact that Birchem ranked higher than two other Wentz
field     agents    on     certain        KOC   field    agent    reports.
However, this is not evidence of pretext.                    Moreover, if
Birchem did have bona fide evidence of pretextual action
by Wentz, it would tend to prove that Wentz fired Birchem
because     he     complained        of     Wentz’s      improper    trade
practices, not because of Birchem’s bipolar disorder.
See Rothmeier v. Investment Advisers, Inc., 85 F.3d 1328,
1337    (8th     Cir.    1996).      In    these     circumstances,       the
district       court     properly         granted     summary     judgment
dismissing Birchem’s ADA claims against both KOC and
Wentz.

                   II. Birchem’s Pendent Claims.
       A. The North Dakota Human Rights Act Claim.                   Under
the NDHRA, “[i]t is a discriminatory practice for an

                                    -12-
employer to . . . discharge an employee . . . because of
. . . physical or mental disability.”            N.D.C.C. § 14-
02.4-03.     “‘Employee’    means   a   person    who   performs
services   for   an   employer,   who   employs   one   or   more
individuals, for compensation, whether in the form of
wages, salaries, commission, or otherwise.”          N.D.C.C. §
14-02.4-02(5).    In construing this statute, the Supreme
Court of North

                             -13-
Dakota generally follows federal court decisions under
analogous       federal     anti-discrimination       statutes.      See
Schumacher v. North Dakota Hosp. Ass’n, 528 N.W.2d 374
(N.D. 1995); Moses v. Burleigh County, 438 N.W.2d 186
(N.D. 1989).      Birchem cites no authority suggesting that
the     Court    would      construe    the   NDHRA    as   protecting
independent contractors or would decline to apply the
common     law    agency      test     in   distinguishing     between
employees and independent contractors.                 Therefore, the
district court’s grant of summary judgment dismissing
this claim against KOC is affirmed.

      However, as we have explained, Wentz is not entitled
to    summary judgment on the employee question, and when
we turn to the district court’s alternative ground of no
pretext, we confront a problem in applying state law.                 In
Schweigert v. Provident Life Ins. Co., 503 N.W.2d 225,
227-29 (N.D. 1993), the Supreme Court of North Dakota
declined to follow St. Mary’s Honor Center v. Hicks,
holding instead that proof of plaintiff’s prima facie
case under the NDHRA shifts to defendant the burden to
prove    it     did   not    engage    in   the   alleged   employment
discrimination.       Proof of pretext, in other words, is not
part of the NDHRA plaintiff’s summary judgment burden.

      “In most cases, when federal and state claims are
joined and the federal claims are dismissed on a motion
for   summary     judgment,      the    pendent    state    claims   are

                                     -14-
dismissed wihout prejudice to avoid ‘[n]eedless decisions
of state law . . . as a matter of comity and to promote
justice between the parties.’”   Ivy v. Kimbrough, No. 96-
1417, slip op. at 4-5 (8th Cir. May 22, 1997), quoting
United Mine Workers v. Gibbs, 383 U.S. 715, 726 (1966).
Because discovery was completed and the case ready for
trial, the district court did not abuse its discretion in
taking up and granting summary judgment on issues of
state law on which there was little basis for dispute.
But we

                          -15-
have now encountered novel issues under the NDHRA that
may require trial and therefore conclude that Birchem’s
NDHRA claim against Wentz should be dismissed without
prejudice.3

       B. The Retaliation Claim.                  Under North Dakota law
(and the law of most other States), an employer may not
discharge even an at-will employee for reasons contrary
to a clear public policy evidenced by a constitutional or
statutory provision.             Ressler v. Humane Soc’y, 480 N.W.2d
429, 431-32 (N.D. 1992); Krein v. Marian Manor Nursing
Home, 415 N.W.2d 793, 795 (N.D. 1987).                        We are unaware of
any decision that has extended this doctrine to include
independent contractors.              See McNeill v. Security Benefit
Life       Ins.   Co.,     28 F.3d 891,       893     (8th    Cir.    1994)
(considering         a    similar        claim        under    Arkansas       law).
Birchem       conceded       in     the     district          court    that     his
retaliation         claim       fails     if     he     was    an     independent
contractor.        Thus, the district court correctly dismissed

       3
        If Birchem had avoided summary judgment on his ADA claim against
Wentz, it is difficult to envision how that claim could be tried to a jury consistent
with Hicks along with a pendent NDHRA claim in which the jury must be instructed
that defendant has the burden of proof. Thus, in future cases, if a North Dakota
employment discrimination plaintiff is entitled to a jury trial on his or her federal
claim(s), the federal court should consider dismissing any pendent or supplemental
claims under the NDHRA before trial. See 28 U.S.C. § 1367(c)(4). Of course, to
avoid this quandary, North Dakota plaintiffs are free to assert claims only under the
state statute in state court, or in federal court if there is diversity jurisdiction.
                                         -16-
Birchem’s       retaliation        claim      against      KOC.4       However,
because the employee

      4
       This decision is buttressed by N.D.C.C. § 34-01-20(1), a 1993 statute that
codified the public policy exception but expressly limited its protections to
employees.
                                       -17-
issue       is   unresolved          as   to     Wentz,   Birchem’s         pendent
retaliation          claim      against          Wentz    should      have     been
dismissed without prejudice.

       C.    The    Breach      of    Contract        Claim.      The      document
defining KOC’s production requirements for field agents
states that, “Field Agents who, after their second year,
have produced less than the $10,000 [requirement] and a
minimum of 50 life sales to members, for two consecutive
years,       will    be     terminated         by    their     General      Agent.”
Birchem alleges (i) that he met this minimum requirement;
(ii)     that       Wentz    terminated             Birchem    for    production
deficiencies; and (iii) that Wentz therefore breached an
oral promise, made when recruiting Birchem, that the
Field Agent Contract would not be terminated so long as
Birchem met his minimum production requirements.

       The Field Agent Contract expressly provided that it
may “be terminated by any of the three parties, for any
reason, at any time by mailing written notice to the last
known address of the other two parties.” Under North
Dakota law, “[t]he execution of a contract in writing .
. . supersedes all the oral negotiations or stipulations
concerning its matter which preceded or accompanied the
execution of the instrument.”                    N.D.C.C. § 9-06-07.          Thus,
we   agree       with     the   district          court   that       the    express
language of the Field Agent contract is controlling and
may not be altered by any prior oral assurances.                                See

                                          -18-
Hillesland v. Federal Land Bank Ass’n, 407 N.W.2d 206,
211 (N.D. 1987); Wadeson v. American Family Mut. Ins.
Co., 343 N.W.2d 367, 371 (N.D. 1984).         Summary judgment
was proper for both defendants.

    D.    Intentional   Infliction    of   Emotional   Distress.
Birchem     argues   that    the   district   court    erred   in
dismissing    his    claim   for   intentional   infliction    of
emotional

                               -19-
distress.    Under North Dakota law, this cause of action
is “narrowly limited to outrageous conduct which exceeds
all possible bounds of decency.”           Muchow v. Lindblad, 435
N.W.2d 918, 924 (N.D. 1989).            We agree with the district
court that Wentz’s conduct in this case falls far short
of the discriminatory harassment inflicted upon a female
office manager in Swenson v. Northern Crop Ins., Inc.,
498 N.W.2d 174 (N.D. 1993).              Even if Wentz confronted
Birchem    and   forced   his    resignation         in   part    to    stem
Birchem’s outspoken criticism, this conduct does not
“exceed all possible bounds of decency.”

    The case is remanded to the district court with
instructions     to   modify    its     final   judgment         so    as   to
dismiss Birchem’s NDHRA and retaliation claims against
Wentz without prejudice.        As so modified, the judgment is
affirmed.

    A true copy.

           Attest:

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

                                 -20-