Labor & Employment Law Daily Employer’s state court lawsuit against discharged transgender employee may be retaliatory
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Friday, June 7, 2019

Employer’s state court lawsuit against discharged transgender employee may be retaliatory

By Victoria Moran, J.D.

While the employer claimed its former employee breached a settlement agreement, she provided sufficient circumstantial evidence that it filed a state court action against her based on retaliatory intent.

In litigation related to a previously settled discrimination suit between a transgender employee and her former employer, a federal court in Illinois denied cross motions for summary judgment against her federal and state-law retaliation claims. Demoted after informing her employer that she would be transitioning from male to female, the employee filed a discrimination suit, which the parties settled. When she subsequently participated in a TV broadcast, the employer sued in state court alleging she had violated the terms of the settlement agreement and disparaged the company. She then filed the instant action alleging retaliation under Title VII and the Missouri Human Rights Act (MHRA). Whether the employer had a retaliatory motive for filing the state court lawsuit against her was a question of fact and the employee provided sufficient circumstantial evidence to show a retaliatory intent, said the court (Hileman v. Internet Wines & Spirits Co. dba Randall’s Wine and Spirits, May 31, 2019, Yandle, S.).

Around two years after the employee was hired as the operations manager for three of the employer’s stores, she notified the owner she was transgender and would be transitioning from male to female. Four months later, she was demoted. The employee filed suit, asserting claims for discrimination and retaliation and the parties settled the case in March 2015.

TV show appearance. As part of the settlement, the employee resigned and entered into a confidential Release and Settlement Agreement. In November, she participated in a TV report entitled “Transgender Community Facing Discrimination in Workplace,” in which she discussed her experience at her former job. Although she never mentioned the company by name, the owner sued in state court alleging she had breached the nondisparagement terms of the settlement agreement. He also asserted claims for defamation, which were ultimately dismissed.

Retaliation? With the breach of contract claim still pending against her in part, the employee filed a retaliation claim in federal court, alleging her former employer brought the meritless state-court action in reprisal for her past activity opposing discrimination.

Moving for summary judgment on her retaliation claims under the MHRA, the employee argued that her protected activity was a contributing factor in the employer’s decision to file the state lawsuit. For its part, the employer moved for summary judgment on the employee’s Title VII and MHRA claims, contending that she could not establish that it had a retaliatory motive for the state court suit.

Title VII. Denying the employer’s motion as to the employee’s Title VII retaliation claim, the court noted that whether the employer filed the state court lawsuit based on a retaliatory intent was a question of fact which the former employee supported with sufficient circumstantial evidence. There was no dispute she engaged in protected activity in filing the federal suit and the employer’s state court lawsuit could be an adverse employment action. At issue was whether there was a causal link between the protected activity and adverse action. The employer argued that the 11-month gap between the time the parties settled the first suit and time the employer filed the state court lawsuit was evidence it had no retaliatory intent. The court was not persuaded and noted that the passage of time alone is not conclusive proof against retaliation.

Good faith belief. The owner also argued that the filing of the state suit was based on a good-faith belief the employee had breached the settlement agreement and had disparaged the company. Arguing that there was sufficient evidence to support her claim that the lawsuit was baseless and therefore retaliatory, the employee pointed to the employer’s testimony he overpaid in the initial discrimination settlement and well as the fact that although the owner claimed the company had been disparaged by the broadcast, it did not sue the TV station or the reporter for defamation, the fact that the employee never stated she was fired in the broadcast (the reporter did), and the fact that company was never mentioned by name.

She also pointed out that the employer failed to provide evidence to support the breach of contract claim in state court, abandoned the defamation claim, and a state appeals court found the employer sued the former employee based on conjecture and speculation. Finding sufficient evidence that the employer filed the state court lawsuit against the employee with retaliatory intent, the court denied summary judgment as to this claim.

Retaliation under the MHRA. The court also denied both parties’ motions for summary judgment on the employee’s MHRA retaliation claims, finding genuine issues of material fact regarding causal connection. While the employee alleged that her discrimination suit was a contributing factor in the employer’s decision to file the state court lawsuit, it argued that it was only motivated by a good faith belief that she had breached the settlement agreement.

Attorneys’ fees. Finally, the court denied the employer’s motion for summary judgment as to the employee’s claim for attorneys’ fees incurred related to the state court suit. The employer argued the claim was barred based on claim preclusion, but the court found the employer failed to plead collateral estoppel and issue preclusion in its answer and thereby waived those defenses.

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