Labor & Employment Law Daily No error in dismissing as a sanction corporate attorney’s Title VII claims
Thursday, January 9, 2020

No error in dismissing as a sanction corporate attorney’s Title VII claims

By Kathleen Kapusta, J.D.

The district court found a lesser sanction would do “nothing to address the shocking betrayal of ethical responsibilities perpetrated” by the deputy general counsel and would be “too minimal to offset such abuse.”

The court below did not err in dismissing, as a sanction for misconduct, a deputy general counsel’s Title VII claims against her corporate employer, the Fifth Circuit ruled, citing evidence that she brought her claims in bad faith, concealed evidence, and violated her ethical responsibilities as an officer of the court. Nor did the court err in granting summary judgment on statute of limitations grounds on the company’s counterclaims against her, a law firm it had retained as outside counsel, and a partner from that firm who had assisted the deputy GC in her claims against the company. The appeals court reversed, however, the grant of summary judgment against the company’s claims regarding legal assistance the partner provided to the deputy GC’s coworker and the deputy GC’s alleged misappropriation of confidential client documents (Paine Snider v. L-3 Communications Vertex Aerospace, LLC, December 31, 2019, Owen, P.).

As deputy GC for L-3 Communications, the employee worked from its Mississippi office. L-3 also retained a law firm located in North Carolina as outside counsel from 2000-2009 to represent it in various legal matters and a partner with that firm worked with the employee on employment-related matters until L-3 stopped utilizing him in September 2005.

Gender bias complaint. Believing that L-3 discriminated against her based on gender, the employee discussed the matter with the partner, who gave her legal advice in 2006 as to when the statutes of limitations would run on various claims. That same year, another L-3 worker, who reported to the employee, complained internally about gender discrimination. Concerned that the employee was assisting her direct report in pursuing her grievances in violation of the employee’s ethical obligations to the company as its legal counsel, L-3 hired two outside firms to investigate. A written report submitted in December 2006 by the firms found that the employee “likely committed multiple sins of omission in her duty of loyalty” and recommended her termination.

Terminated. When the employee during that investigation also claimed to have been a victim of gender discrimination, L-3 initiated a second investigation in January 2007. The partner, without notifying or consulting L-3, helped her prepare a lengthy legal document for submission to the outside consultant hired by L-3 to investigate her claim. By August 2008, the employee was placed on an unpaid leave of absence and subsequently terminated in February 2009 as part of a downsizing.

Lower court proceedings. The employee then sued, asserting claims under Title VII for discrimination, harassment, and retaliation. L-3 asserted counterclaims against the employee and claims against the outside law firm and partner. The district court dismissed the employee’s claims as a sanction and granted summary judgment denying relief on all of L-3’s claims, finding they were barred by the statutes of limitation.

Statute of limitations. L-3 argued that the district court erred in finding its claims barred by the Mississippi’s three-year statute of limitations, contending there were fact disputes regarding the discovery rule, the fraudulent concealment doctrine, and the continuing tort doctrine. Because it filed its counterclaims and claims in February 2012, three years prior would be February 2009. Under Mississippi law, the appeals court observed, the discovery rule is the proper test for deciding when the statute of limitations for a legal malpractice action begins to run and the rule is applied when the facts indicate that “it is unrealistic to expect a layman to perceive the injury at the time of the wrongful act.”

Here, the court pointed out, in-house attorneys for L-3 and its affiliates were directly responsible for investigating the partner’s, firm’s, and employee’s respective conflicts of interest and for investigating the relationship between the employee and partner. Observing that the employee’s direct report filed an internal complaint of discrimination in 2006, the court noted that the report regarding that investigation found the employee had repeatedly participated in inappropriate email correspondence with her coworkers and clearly reflected that by at least December 2006, L-3 had access to emails on its server between the employee and partner, had in fact accessed those emails, and had provided at least some of them to outside counsel. Further, the report was sent to general counsel for L-3’s parent company.

Moreover, after receiving the report, L-3 brought in an outside consultant to investigate the employee’s claims of discrimination and retaliation and in April 2007, the partner helped the employee draft a written document to present to the consultant detailing the employee’s allegations against officers at L-3. The partner’s participation in pursuing these claims, the court noted, was evidenced in emails on L-3’s server between the partner and the employee. Further, pointing to numerous emails over a period of three months on the company’s server, the court noted that by May 2007, L-3 knew the partner had a conflict of interest with regard to the employee’s allegations against L-3 officers and had attempted to intervene on her behalf in her pursuit of those claims.

Reasonable minds. Not only did L-3 confront the partner and his firm in May 2007, expressly referencing a conflict of interest, when the employee filed her EEOC claim in August 2007 and L-3 hired outside counsel to defend the allegations, “reasonable minds could not differ that [L-3] possessed sufficient information to bring a claim against the partner and his firm based on the assistance he had provided to the employee.” In addition, by May 2007, L-3 had emails on its servers that evidenced a relationship between the employee and the partner unrelated to his representation of the company, including one in which he wrote “Vanquisher of lesser women (and who isn’t?), dazzler of men, and ruler of all she surveys. Good night, Gorgeous.—Your Buddy.”

There was also an email from the partner to the employee about covering their tracks, in which he stated that they could not do much “about the electronic trail” and that “some scrubbing might be good if we can figure out how to do it without making anything worse.” Accordingly, said the court, based on this evidence L-3 could have stated the same claims in 2007 against the partner and his firm that it first asserted in 2012 regarding his association with the employee.

Fraudulent concealment doctrine. As to L-3’s assertion that the fraudulent-concealment doctrine tolled the statute of limitations, the court again pointed out that the partner’s assistance to the employee and the conflict of interest was well-known to L-3 by May 2007 and there was no fraudulent concealment after that date. Nor did L-3’s actions after its May 2007 encounters with the partner and his firm regarding the employee constitute due diligence on L-3’s part as it had access to its own email server and had in fact found emails between them in 2006, which it gave to outside counsel. And while L-3 argued that the partner and his firm had a continuing obligation to disclose their own breaches of fiduciary duty and legal malpractice, the court explained that the nature of and essential facts supporting L-3’s claims against the partner and his firm remained unchanged since 2007. Thus, the lower court did not err in granting summary judgment in favor of the partner and his firm as to the fraudulent concealment and duty to disclose arguments.

Continuing tort doctrine. Nor did the continuing tort doctrine toll the statute of limitations as to L-3’s claims against the employee, the partner, and his firm, said the court, rejecting the company’s contention that any contact between the partner and employee after she filed her initial EEOC complaint constituted discrete wrongs or torts. Quoting a Mississippi appeals court decision, the court noted that a “continuing tort sufficient to toll a statute of limitations is occasioned by continual unlawful acts, not by continual ill effects from an original violation.”

Dismissal as sanction. Turning to the employee’s contention that the district court violated her due process rights by imposing an inherent-authority sanction when it dismissed her Title VII claims, the appeals court noted that the district court held a lengthy hearing and she had notice that the hearing concerned sanctions and that the court might impose them. She also knew L-3 sought dismissal and that it based its request for sanctions on perjury and withholding documents—the same misconduct the court used to justify its inherent authority sanctions. In addition, she had an opportunity to be heard at the first sanctions hearing and a subsequent motion to reconsider cured whatever due process concerns the employee might have had about the initial hearing.

Contumacious conduct. Nor did the court err when it found clear evidence of contumacious conduct that “undermined the integrity of the judicial conduct.” Not only did it find she brought her Title VII claims in bad faith, it found she conspired with the partner and attempted to conceal his assistance in pursuing her claims.

In addition, observed the appeals court, the lower court found the employee concealed material evidence during discovery when she failed to produce “voluminous emails, documents, and factual matters” that would have revealed the partner’s assistance. The lower court also found the employee gave inconsistent testimony under oath, observed the appeals court, noting that during her deposition in the Title VII action, she stated that she was not using the partner to assist her but in a later deposition in a separate lawsuit, she testified that he was the impetus for filing her discrimination claim and called him her “quarterback.”

Further, the lower court did not abuse its discretion when it found that dismissal of her Title VII claims was the only appropriate remedy, said the appeals court, pointing to the lower court’s conclusion that a lesser sanction would do “nothing to address the shocking betrayal of ethical responsibilities” perpetrated by the employee and would be “too minimal to offset such abuse.”

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