Williams v. Joe Lowther Insurance Agency, Inc.

February 12 2008
DA 06-0609
IN THE SUPREME COURT OF THE STATE OF MONTANA
2008 MT 46LISA WILLIAMS,
Plaintiff and Appellee,
v.
JOE LOWTHER INSURANCE AGENCY, INC.,
Defendant and Appellant.
______________________________________
LISA WILLIAMS,
Plaintiff and Appellee,
v.
JOE LOWTHER INSURANCE AGENCY, INC.,
Defendant and Appellant.
_______________________________________
JOE LOWTHER INSURANCE AGENCY, INC.,
Plaintiff, Petitioner and Appellant,
v.
LISA WILLIAMS,
Defendant, Respondent and Appellee.
APPEAL FROM: District Court of the Thirteenth Judicial District,
In and For the County of Yellowstone, Cause Nos. DV 2005-0615
and DV 2005-656
Honorable Susan P. Watters, Presiding Judge
COUNSEL OF RECORD:
For Appellant:
John L. Amsden, Beck, Amsden & Ruggiero, PLLC, Bozeman,
Montana
For Appellee:
Phillip R. Oliver, Oliver & Associates, Billings, Montana
Submitted on Briefs: August 22, 2007
Decided: February 12, 2008
Filed:
__________________________________________
Clerk
2
Justice Patricia O. Cotter delivered the Opinion of the Court.
¶1 On July 24, 2006, the District Court of the Thirteenth Judicial District upheld an
order of the Montana Human Rights Commission (HRC) which affirmed a Final Agency
Decision of the Montana Department of Labor and Industry (Department). The
Department’s final decision granted a judgment and damages to appellee Lisa Williams
(Williams) based on a complaint for sexual discrimination which she filed against the
appellant Joe Lowther Insurance Agency, Inc. (Corporation). The Corporation now
appeals the District Court’s decision. We affirm.
FACTUAL AND PROCEDURAL BACKGROUND
¶2 Joe Lowther (Lowther) became the sole shareholder and owner of the Corporation
in late 1995, after the death of his father, Joe Lowther, Sr. Joe Lowther, Sr. had formed
the Corporation in Billings, Montana in 1969, and served as the district manager for
Farmers Insurance Group (Farmers). Lowther assumed his father’s position when he
took over the Corporation.
¶3 Lowther met Williams in 1997 or 1998 while he was a patient of Heights Eye Care
Center in Billings. Williams worked there as a receptionist. Lowther was a divorced
father of three children. Williams was married with two children. Lowther and Williams
began a relationship, and sometime in 2001 Lowther approached Williams about coming
to work for the Corporation. Initially she refused, but then accepted his offer in May of
2001. At the time, two other women worked in the office for Lowther. In August of
2001, Lowther and Williams entered into a consensual, sexual relationship. They
concealed this affair from Williams’ spouse. By January of 2002, while Williams and
3
Lowther were still in the relationship, Lowther’s other employees had left, and Williams
was Lowther’s sole employee.
¶4 In June 2002, Williams and her husband initiated proceedings to adopt a third
child. In summer of 2002 Lowther began pressing Williams to divorce her husband.
Through the end of 2002 and into early 2003, Williams resisted this pressuring, citing to
the pending adoption of the child and the untimeliness of initiating a divorce during the
holiday season. In May 2003 Williams’ husband lost his job, and he decided to stay
home with their children. For some reason, this infuriated Lowther and he felt betrayed.
Lowther then increased his efforts to persuade Williams to leave her husband. However,
these efforts were not successful, and in late May of 2003 Williams ceased having sexual
relations with Lowther.
¶5 From this point, things went steadily downhill between Lowther and Williams.
The two quarreled in public, and the work environment was tense and unbearable to
Lowther because he and Williams were the only persons working at the Corporation. On
June 20, 2003, Lowther met with Williams, telling her he could not “take” the situation
between them anymore. Lowther told Williams that he needed her more personally than
professionally. He offered her a severance package consisting of wages and a lump sum
payment and gave her a choice: either resume an intimate relationship with him, or leave
her job. At the time, Williams was making approximately $36,000 per year and needed
the money to support her family. She was shocked and angry, and refused Lowther’s
offer.
4
¶6 The next day, Williams telephoned Lowther and told him she had gone to an
attorney, and that if he attempted to end her employment or reduce her wages he would
be in “big trouble.” Lowther reiterated his previous offer, increasing the amount of the
lump sum payment. Williams refused this offer as well.
¶7 On August 4, 2003, Lowther terminated Williams’ employment with the
Corporation. After a lengthy discussion concerning the status of pending business
matters for the Corporation, Lowther again told Williams that he needed her more
personally than professionally, and again offered her a choice between resuming an
intimate relationship with him and losing her job. Williams refused to leave her husband
and resume her relationship with Lowther.
¶8 After she was fired, Williams went to executives for Farmers and complained that
she had been wrongfully discharged. Williams told the executives that she had an
“emotional” relationship with Lowther, but falsely denied that she had a “physical”
relationship with him. Williams’ statements to the Farmers’ executives led them to
believe that Lowther had pursued a sexual relationship with Williams and that she found
his attentions unwelcome during the entire relationship.
¶9 The Farmers’ executives arranged a meeting with Lowther to discuss this matter.
He lied about firing Williams, and falsely denied he had had a physical relationship with
her. He did, however, admit to much of the rest of the relationship, including the
exchange of notes and gifts, and his repeated statements that he needed her personally,
but not professionally. Soon after this meeting on August 15, 2003, Farmers’ executives
5
gave Lowther the option of resigning from his position as district manager for Farmers,
or being fired. He chose the former course.
¶10 On November 21, 2003, Williams filed a complaint with the Department, alleging
that the Corporation “discriminated against her on the basis of sex (female) when it
subjected her to unwelcome quid pro quo sexual harassment culminating when [the
Corporation] terminated her employment on or about August 4, 2003.” A contested case
hearing on the matter was held in Billings on October 18 and 19, 2004, before a hearing
examiner for the Department. On March 7, 2005, the hearing examiner issued a Final
Agency Decision. On the basis of extensive findings of facts and conclusions of law, the
examiner ruled in favor of Williams, concluding that the Corporation “discriminated
against her because of sex.” The examiner ordered the Corporation to pay Williams
$30,155.13 in damages.
¶11 Lowther appealed this ruling to the HRC. On May 26, 2005, the HRC affirmed
the Department’s Final Agency Decision. In its order, the HRC held as follows:
In discussion, the Commission noted that, in the end, this is still an
employment relationship. Joe Lowther was Lisa Williams supervisor and,
as the employer, Lowther’s actions should not be excused simply because
the office is smaller than others are. The employer failed to consider other
options besides termination. Therefore, after careful and due
consideration, the Commission concludes that the Final Agency Decision
in this matter is supported by substantial evidence and complies with the
essential requirements of the law. Admin R. Mont. 24.9.1717(2).
¶12 Lowther appealed the HRC’s ruling to the District Court, challenging the
Department’s Final Agency Decision on several grounds. First, he argued that procedural
irregularities in the proceedings prejudiced his substantial rights. Second, he maintained
6
that although the hearing examiner had noted valid, non-discriminatory reasons for
Williams’ firing, he failed to make findings essential to a “mixed motive” analysis.1
Lowther argued that at best Williams proved a “mixed motive” case, and that the
Department improperly awarded damages in violation of Admin. R. M. 24.9.611. Third,
Lowther contended that Williams had failed to prove she was a member of a protected
class, and further failed to prove that her termination was due to illegal discrimination,
instead of simply the natural fallout from the end of her personal relationship with
Lowther.
¶13 The District Court rejected Lowther’s challenges, and affirmed the rulings of the
HRC and hearing examiner. The District Court concluded that Williams had made a
prima facie showing of a case of quid pro quo sexual discrimination, and that a
presumption that the termination was not based on sexual discrimination, because of the
previous consensual relationship, did not apply. As stated by the District Court:
The timing of the termination is all-important to this case—a point
Petitioner is intent on overlooking. As noted above and explained more
fully in the Agency’s Findings of Fact, in late May 2003, the parties
stopped having sex. Petitioner pressured Respondent to leave her
husband. On June 20, 2003, after months of discussion and consternation
regarding their future relationship, Petitioner offered Respondent a
severance package and a choice. She could either resume an intimate
relationship with Petitioner and leave her husband, or she could leave her
job. Respondent did not want to resume her relationship with Petitioner or
leave her job. On August 4, 2003, Petitioner fired Respondent.
The Agency concluded and this Court agrees that Petitioner’s actions
constituted quid quo pro sexual harassment. His pressuring Respondent to
1
“Mixed motive” cases are situations where there may be other, non-discriminatory reasons for a
decision to terminate. E.g., Laudert v. Richland Co. Sheriff’s Dept., 2000 MT 218, 301 Mont.
114, 7 P.3d 386.
7
resume their relationship amounted to unwelcomed sexual advances,
requests, and conduct. He then made Respondent’s submission to the
choice he offered explicitly a term of her employment. Her rejection of
Petitioner’s choice was the reason for her dismissal.
¶14 The District Court, citing Lincoln Co. v. Sanders Co., 261 Mont. 344, 862 P.2d
1133 (1993) and § 2-4-702(1)(b), MCA, also rejected Lowther’s “mixed motive”
argument, holding that because Lowther failed to raise this argument before the hearing
examiner he could not raise it for judicial review before the District Court. Moreover, the
District Court noted that while Lowther offered a variety of non-discriminatory reasons
for his decision to terminate Williams, this was done after Williams had made a prima
facie case for sexual discrimination. Thus, the burden had already shifted to Lowther to
prove non-discriminatory reasons for the termination. The hearing examiner found
Lowther’s proffered reasons for the termination, including poor work performance and a
job offer Williams allegedly had received with another company, to be pre-textual. In
particular, the District Court pointed to the hearing examiner’s Finding of Fact No. 42,
where the examiner found that even after Lowther had terminated Williams he offered
her the choice of returning to her job if she resumed her intimate relationship with him, as
undercutting any argument that Lowther fired Williams for non-discriminatory reasons.
The District Court also rejected Lowther’s argument that the hearing examiner failed to
make “specific and substantial findings of pretext before it rejected his legitimate, non-
discriminatory reasons for Respondent’s termination.” The District Court pointed
specifically to roughly fifteen Findings of Fact that provided substantial support for the
hearing examiner’s decision.
8
¶15 Additionally, the District Court rejected Lowther’s claim that the hearing
examiner prejudiced his rights by virtue of irregularities in the proceedings. At the
hearing, Lowther attempted to offer expert testimony which would have explained why
his decision to terminate Williams was commercially reasonable in light of a “love
contract” which the parties had allegedly entered into. This “love contract” was
supposedly an agreement between the parties that if the relationship ended, Williams
would leave the Corporation. The hearing officer rejected this expert testimony as
irrelevant, and noted that whether or not the parties entered into a “love contract” was a
question of fact that did not require expert testimony to resolve. Lastly, the District Court
rejected Lowther’s argument that the hearing examiner prejudiced his substantial rights
by changing the legal basis for his decision. Lowther maintained the hearing examiner
first announced that he would apply the standard found in Keppler v. Hinsdale Tp. High
Sch. Dist. 86, 715 F. Supp. 862 (N.D. Ill. 1989), which Lowther claims mandates a
presumption of non-discriminatory reasons for a termination when the parties had
initially entered into a consensual sexual relationship, but then changed course and
rejected the adoption of this presumption in his final decision. The District Court
discounted this argument, finding that the hearing examiner never adopted the Keppler
presumption, nor was he required to do so.
¶16 Lowther appeals the District Court’s decision to this Court and raises four issues.
However, we decline to address three of these issues because he failed to either raise
them below, or properly preserve them for appeal. Unified Indus., Inc. v. Easley, 1998
MT 145, ¶ 15, 289 Mont. 255, ¶ 15, 961 P.2d 100, ¶ 15 (“The general rule in Montana is
9
that this Court will not address either an issue raised for the first time on appeal or a
party’s change in legal theory.”). For instance, Lowther argues that the HRC erred in
affirming the hearing examiner’s decision on the basis that the Corporation failed to
pursue other options prior to terminating Williams. See ¶ 11. However, Lowther did not
raise this issue before the District Court. Similarly, Lowther argues that Williams should
be denied relief due to her failure to mitigate damages stemming from her termination.
Again, Lowther failed to raise this issue before the District Court. Finally, Lowther
argues that he has proved a “mixed motive” case, and that damages were improper under
Admin. R. M. 24.9.611. Although he did raise this issue before the District Court, the
District Court rejected it because he had not raised it before the hearing examiner. See
¶ 14. Lowther could have challenged this conclusion under § 2-4-702(1)(b), MCA,
provided he could demonstrate that his failure to raise the argument before the agency
was for “good cause.” However, Lowther has not presented this argument, or even
alluded to this statute in his briefs. Thus, we decline to address the foregoing issues on
appeal.
ISSUE
¶17 We state the remaining issue on appeal as follows: Did the District Court err in
affirming the decisions of the HRC and the Department that the Corporation terminated
Williams’ employment based on illegal sexual discrimination?
STANDARD OF REVIEW
¶18 “A district court reviews an administrative decision in a contested case to
determine whether the findings of fact are clearly erroneous and whether the agency
10
correctly interpreted the law. We employ the same standards when reviewing a district
court order affirming or reversing an administrative decision.” Ostergren v. Dept. of
Revenue, 2004 MT 30, ¶ 11, 319 Mont. 405, ¶ 11, 85 P.3d 738, ¶ 11 (citation omitted).
Moreover, “[p]arties must raise issues and present and develop evidence at the agency
level. A district court has no authority to address new evidence on judicial review of
agency determinations. As such, this Court is bound by the same limited scope of
review.” Ostergren, ¶ 15.
DISCUSSION
¶19 Lowther argues that Williams failed to prove her termination was due to
discrimination based on her sex, and that the Department, HRC, and the District Court,
erred in concluding otherwise. In particular, Lowther argues that under Bryson v. Chi. St.
U., 96 F.3d 912 (7th Cir. 1996), Williams was required to prove she is a member of a
protected class, that she was subject to unwanted sexual advances, and that Lowther’s
conduct was sexually motivated, but she has failed to do so. Lowther also claims that
under Keppler, a presumption arises in this case that his reasons for terminating Williams
were due to fallout from their relationship, and not based on sex discrimination, and that
Williams has failed to rebut this presumption.
¶20 Williams argues that the District Court, HRC, and the Department correctly
determined that she was terminated based on sexual discrimination. Williams argues that
even under Keppler, which is arguably supportive of Lowther’s position, she has proven
sex discrimination, because Keppler recognizes that “if an employer threatens retaliation
to the employee if the employee fails to continue the relationship, there can be an action
11
based on gender or sex.” Williams cites Finding of Fact No. 42 (See ¶ 14) as support for
this conclusion, and points out that Lowther has not alleged this finding, or indeed any of
the other findings, are clearly erroneous. Additionally, Williams refutes Lowther’s
arguments that she was not subject to unwanted sexual advances. Williams maintains
that Lowther’s repeated requests for her to return to the relationship were requests for
sexual favors, thus constituting unwanted sexual advances. Finally, Williams argues the
hearing examiner correctly concluded that the issue of Lowther’s motivation in resuming
their intimate relationship was a question of fact, and that Lowther failed to prove before
the examiner that he “was motivated to return to the former relationship for reasons other
than sex.”
¶21 The Montana Human Rights Act (MHRA) bans employment discrimination
because of sex. Section 49-2-303(1)(a), MCA. Quid pro quo sexual discrimination
claims are cognizable under the MHRA. Campbell v. Garden City Plumbing and
Heating, 2004 MT 231, ¶ 15, 322 Mont. 434, ¶ 15, 97 P.2d 546, ¶ 15. Because the
MHRA is closely modeled after Title VII of the Civil Rights Act of 1964, we frequently
refer to federal case law in construing the MHRA. Stringer-Altmaier v. Haffner, 2006
MT 129, ¶¶ 16-17, 332 Mont. 293, ¶¶ 16-17, 138 P.3d 419, ¶¶ 16-17.
¶22 To date, we have not explicitly defined the elements required to make a prima
facie case for quid pro quo sex discrimination. The hearing examiner, recognizing this,
cited to the definition for actionable sexual harassment as set forth in 29 C.F.R.
§ 1604.11, which was adopted pursuant to Admin. R. M. 24.9.1407. Harrison v. Chance,
244 Mont. 215, 220-221, 797 P.2d 200, 203-204 (1990).
12
Unwelcome sexual advances, requests for sexual favors, and other verbal
or physical conduct of a sexual nature constitute sexual harassment when
(1) submission to such conduct is made either explicitly or implicitly a
term or condition of an individual’s employment, (2) submission to or
rejection of such conduct by an individual is used as the basis for
employment decisions affecting such individual . . . .
29 C.F.R. § 1604.11(a).
¶23 The hearing examiner further found that under federal law a quid pro quo sexual
discrimination claim is properly considered as a “job detriment claim.” The hearing
examiner cited to Priest v. Rotary, 634 F. Supp. 571 (N.D. Cal. 1986), where the court
equated job detriment claims to situations where “tangible job benefits [are conditioned]
on acquiescence to requests for sexual favors or other conduct of a sexual nature . . . .”
Priest, 634 F. Supp. at 581. The hearing officer also rejected, as inconsistent with the
MHRA, Lowther’s argument that in cases where the alleged sex discrimination follows
the ending of a consensual sexual relationship, Keppler requires courts to adopt a
presumption that the alleged harassment is fallout from the relationship, and shift the
burden to the claimant to show that the conduct was due to sex discrimination. Keppler,
715 F. Supp. at 868-69.
¶24 Before the District Court, and on appeal, Lowther urges us to adopt the Keppler
presumption as well as a five-factor test from Bryson which requires claimants to make
the following prima facie showing in quid pro quo sex discrimination cases:
In order to prove such a claim, many courts of appeal use a five-part test,
asking whether the plaintiff has shown (1) that she or he is a member of a
protected group, (2) the sexual advances were unwelcome, (3) the
harassment was sexually motivated, (4) the employee’s reaction to the
supervisor’s advances affected a tangible aspect of her employment, and
(5) respondeat superior has been established.
13
Bryson, 96 F.3d at 915.
¶25 The District Court declined to adopt this five-factor test, concluding that “the
elements found in the federal Guidelines are the proper method to determine whether an
employer has committed quid pro quo sexual harassment. If a party can satisfy the terms
found therein, that is sufficient to establish a prima facie case of quid pro quo sexual
harassment. There is no need to employ an unnecessarily complicated and overly
formalistic test.” Similarly, the District Court rejected the adoption of the Keppler
presumption in Montana, noting that its holding has been criticized by other courts. E.g.,
Babcock v. Frank, 729 F. Supp. 279 (S.D.N.Y. 1990). While the District Court
acknowledged that a previous consensual relationship may play a role in determining
whether sex discrimination has occurred in some cases, the District Court found such a
factor inapplicable to the present controversy. As stated by the District Court:
[W]hen, as in the instant case, the affair is over and the employer threatens
a penalty if the employee will not continue the physical relationship, the
employer “commits illegal sex-based discrimination cognizable” under a
quid pro quo claim. Babcock, 729 F. Supp. at 288.
¶26 Accordingly, the District Court focused its analysis on whether the hearing
examiner’s findings supported Williams’ claims of sex discrimination. The District
Court concluded that they did, see ¶ 13, and rejected Lowther’s attempts to rebut this
showing “by characterizing his efforts to win Respondent back as motivated by his desire
to continue their romantic relationship and not by a desire for sexual intercourse with an
employee.”
14
¶27 We affirm the District Court’s conclusion. Lowther has provided no persuasive
reason to adopt the multi-factor Bryson test, or the Keppler presumption. Instead, we will
continue looking to both our body of case law and the federal guidelines in resolving sex
discrimination claims. Harrison, 244 Mont. at 220-221, 797 P.2d at 203-04. As noted by
the district court in Savino v. C.P. Hall Co., 988 F. Supp. 1171 (N.D. Ill. 1997), “[on] the
quid pro quo question . . . the [Supreme] Court [has] noted that the E.E.O.C.’s Guidelines
on Sexual Harassment ‘constitute a body of experience and informed judgment to which
courts and litigants may properly resort for guidance.’ ” Savino, 988 F. Supp. at 1181
(quoting Meritor Savings Bank, FSB, v. Vinson, 477 U.S. 57, 65, 106 S. Ct. 2399, 2404
(1986)).
¶28 As Williams notes, Lowther does not challenge as clearly erroneous the hearing
examiner’s Finding of Fact No. 42 that even after he terminated her employment he
offered Williams the choice of having her job back if she resumed the intimate
relationship. The assertion by Lowther that this overture was not sexually motivated
strains the bounds of credulity. This finding, in light of Lowther’s repeated efforts to
condition Williams’ employment on continuation of the intimate relationship,
demonstrates that “submission to or rejection of such conduct by [Williams was] used as
the basis for employment decisions affecting [her] . . . .” Harrison, 244 Mont. at 220-
221, 797 P.2d at 203-04 (citing 29 C.F.R. § 1604.11(a)). Thus, we affirm the District
Court.
CONCLUSION
15
¶29 We affirm the District Court’s decision upholding the award of damages by the
Department and HRC to Williams due to illegal sex discrimination by Lowther and the
Corporation.
/S/ PATRICIA COTTER
We Concur:
/S/ KARLA M. GRAY
/S/ JOHN WARNER
/S/ BRIAN MORRIS
Justice W. William Leaphart, specially concurring.
¶30 I write separately to note that I am inclined to agree with Lowther that there is a
distinction between harassment based upon “gender” as opposed to personal animus
stemming from a “failed relationship.” The majority of federal courts recognize such a
distinction. See e.g. Mosher v. Dollar Tree Stores, Inc., 240 F.3d 662, 668 (7th Cir.
2001) (“[A]fter a longtime sexual relationship like this one goes sour, it will be only the
unusual case that can escape summary judgment.”); Excel Corp. v. Bosley, 165 F.3d 635,
641 (8th Cir. 1999) (J. Loken, concurring) (writing separately to distinguish between
personal animus from discrimination because of gender). See also Succar v. Dade
County School Bd., 229 F.3d 1343, 1345 (11th Cir. 2000) (holding the “harassment . . .
was motivated not by his male gender, but rather by [the former lover’s] contempt for
16
[plaintiff] following their failed relationship; [plaintiff’s] gender was merely
coincidental.”); accord Pipkins v. City of Temple Terrace, Fla., 267 F.3d 1197, 1200
(11th Cir. 2001); but see Lipphardt v. Durango Steakhouse of Brandon, Inc., 267 F.3d
1183 (11th Cir. 2001). However, that distinction hinges upon a fact-intensive inquiry.
Here, Lowther does not challenge the agency’s finding that he gave Williams an
ultimatum which was “sexual” in nature; that is, resume the sexual relationship or be
fired. Since Lowther has not challenged that finding, he is unable to effectively contest
the conclusion that his offer was a quid pro quo sexual harassment. Accordingly, I
concur.
/S/ W. WILLIAM LEAPHART
17