James P. Mitchell v. James Davenport, Commissioner of the Departmentof Employment Security of the State of Tennessee, Noma Outdoor Products, Inc.

IN THE COURT OF APPEALS OF TENNESSEE
WESTERN SECTION AT JACKSON
JAMES P. MITCHELL, )
)
Plaintiff/Appellant, ) Madison Chancery No. 48842
)
VS. ) Appeal No. 02A01-9510-CH-00230
)
JAMES DAVENPORT, Commissioner )
of the Department of Employment )
Security of the State of Tennessee; )
FILED
NOMA OUTDOOR PRODUCTS, ) Feb. 12, 1997
INC., )
) Cecil Crowson, Jr.
Defendants/Appellees. ) Appellate Court Clerk
APPEAL FROM THE CHANCERY COURT OF MADISON COUNTY
AT JACKSON, TENNESSEE
THE HONORABLE JOE C. MORRIS, CHANCELLOR
CONNIE WESTBROOK
THOMAS E. VORNBERGER
Memphis, Tennessee
Attorneys for Appellant
CHARLES W. BURSON
Attorney General & Reporter
KIMBERLY M. FRAYN
Pursuant to Rule 7 of the Rules
of the Supreme Court of Tennessee
JENNIFER HELTON SMALL
Deputy Attorney General
Nashville, Tennessee
Attorneys for Appellee, State of Tennessee
CARY SCHWIMMER
KAREN W. GROCHAU
KIESEWETTER WISE KAPLAN SCHWIMMER & PRATHER, PLC
Memphis, Tennessee
Attorneys for Appellee, Noma Outdoor Products, Inc.
AFFIRMED
ALAN E. HIGHERS, J.
CONCUR:
DAVID R. FARMER, J.
HOLLY KIRBY LILLARD, J.
In this unemployment compensation case, James Mitchell (“Mitchell”) filed a claim
for unemployment compensation with the Tennessee Department of Employment Security
(“TDES”). TDES approved Mitchell’s claim, and Mitchell’s employer, NOMA Outdoor
Products, Inc. (“NOMA”), appealed TDES’ claim approval. On appeal, the Appeals
Tribunal ruled that Mitchell was not eligible for unemployment benefits pursuant to T.C.A.
§ 50-7-303(a)(2) due to work-connected misconduct and declared that the $1,190.00 in
unemployment benefits that Mitchell had previously received was an overpayment.
Mitchell thereafter requested that TDES waive his $1,190.00 overpayment pursuant to
T.C.A. § 50-7-303(d)(2). The Appeals Tribunal denied Mitchell’s request for a waiver of the
overpayment, and Mitchell appealed the decision of the Appeals Tribunal to the Board of
Review. The Board of Review adopted the findings of fact and decision of the Appeals
Tribunal and denied Mitchell’s request for a waiver of the overpayment. Mitchell thereafter
filed a petition to rehear which was denied by the Board of Review. Pursuant to T.C.A. §
50-7-304(i), Mitchell filed a petition for certiorari in chancery court seeking judicial review
of the Board’s decision. The chancery court dismissed Mitchell’s petition for certiorari and
affirmed the decision of the Board of Review, denying Mitchell’s request for a waiver of the
overpayment. Mitchell appeals from the order of the chancery court arguing that the
chancery court erred in admitting additional evidence and erred in not vacating or setting
aside the decision of the Board of Review. For the reasons stated hereafter, we affirm the
judgment of the chancery court.
FACTS
The following facts were found by the Appeals Tribunal. From September 13, 1988
until May 18, 1993, Mitchell was employed by NOMA as an assistant controller in credit
and collections. As assistant controller, Mitchell’s employment responsibilities included
pursuing late payments and employing collection agencies to pursue late payments. After
an investigation by the U.S. Attorney’s Office, Mitchell was indicted in two counts of an
indictment as one of the credit and collection managers who received monetary kickbacks
from collection agencies. As a result of the indictment, Mitchell was arrested by FBI
officials while at work on May 3, 1993. An FBI investigation uncovered two checks made
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payable to Mitchell from collection agencies named in the indictment for one-third of the
amount that NOMA had paid the collection agencies two days earlier. An investigation by
NOMA following Mitchell’s arrest revealed a lack of documentation in their files concerning
the collection agencies under indictment as compared to their documentation regarding
other collection agencies in their files. NOMA also discovered that money was not collected
and forwarded to them in the usual manner by the collection agencies named in the
indictment. NOMA’s files indicated a lack of charges to debtors for fees paid to the indicted
collection agencies, which was inconsistent with NOMA’s procedure with other collection
agencies. In addition, after NOMA personally contacted some of the debtors involved, the
debtors indicated that they had had no contact with any collection agencies trying to collect
a debt. NOMA thereafter sought information from Mitchell concerning the irregularities
uncovered in their investigation. When asked about the discrepancies, Mitchell refused
to respond, and NOMA terminated Mitchell’s employment.
On June 1, 1993, Mitchell filed a claim for unemployment compensation with TDES.
NOMA subsequently submitted its answer to TDES’ request for separation information and
stated in its answer that Mitchell was “terminated, effective May 18, 1993, because of
breach of the duties of loyalty and trust, and misuse of position. Received unauthorized
payment from vendor.”
TDES approved Mitchell’s claim for unemployment benefits on June 9, 1993, and
NOMA appealed TDES’ claim approval to the Appeals Tribunal.
Based upon their findings of fact, the Appeals Tribunal ruled that Mitchell was not
eligible for unemployment compensation benefits pursuant to T.C.A. § 50-7-303(a)(2) due
to employee misconduct. The Appeals Tribunal determined that the evidence showed that
Mitchell’s actions amounted to work-connected misconduct within the meaning of T.C.A.
§ 50-7-303(a)(2) for two reasons. First, the Appeals Tribunal concluded that Mitchell took
personal payments from collection agencies that did business with NOMA in collecting past
due debts; and second, the Appeals Tribunal concluded that Mitchell’s failure to cooperate
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with NOMA in responding to questions arising out of the scope of Mitchell’s employment
amounted to work-connected misconduct.
Instead of appealing the decision of the Appeals Tribunal to the Board of Review,
Mitchell requested that TDES waive its $1,190.00 overpayment to him pursuant to T.C.A.
§ 50-7-303(d)(2) which provides:
[u]pon written request by any such person submitted to the
commissioner within ninety (90) days from the date of
determination of the overpayment, the commissioner shall
waive repayment of the overpaid amounts if such person
proves to the satisfaction of the commissioner that all of the
following conditions exist:
(A) The overpayment was not due to fraud,
misrepresentation or willful nondisclosure on the
part of such person;
(B) The overpayment was received without fault
on the part of such person; and
(C) The recovery of the overpayment from such
person would be against equity and good
conscience.
Mitchell’s request for a waiver of the overpayment was referred to the Appeals
Tribunal for a hearing and decision. The decision of the Appeals Tribunal states in part as
follows:
FINDINGS OF FACT: Claimant filed a claim for unemployment
benefits on June 1, 1993, that was approved by Agency
decision. The employer filed an appeal, and a hearing was
conducted on July 22, 1993, at which time both parties
appeared and testified. The Appeals Tribunal reversed the
Agency decision, and denied benefits, creating an
overpayment of $1190. Claimant is 61 years old and
unemployed. His wife is employed and earns about $25,000
per year which is their total family income. They have two
children, both of whom are college students, dependant upon
their parents for support. Prior to his separation, claimant had
worked as an account manager for a company for five years,
and, at the time of separation, his salary was in excess of
$60,000 per year. Prior to that, he worked for another
company for seven years, and his salary was about $40,000
per year there. At his separation, they had living expenses for
a household of four, based on a family income of about
$90,000 per year, which included a house valued at about
$200,000 on which they paid three mortgage payments.
Claimant has since had to sell that house, and purchase
another one. He has estimated his mortgage payments are
about $900 per month. He is seeking and is able to accept
employment if offered. He feels that his age is a hindrance in
employer’s [sic] wanting to offer him work, but otherwise has
no limitations. He graduated from college with a degree in
business. The date of the Appeals Tribunal decision creating
the overpayment was July 30, 1993.
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CONCLUSIONS OF LAW: While claimant is not now
employed, his level of education and past work history show
that he is capable of obtaining employment in a rather high
salary level. The decision creating the overpayment in this
matter is only about two months old. While it may not be
reasonable on the part of the agency to demand immediate
and total repayment of the overpayment, it is also not
unreasonable to give claimant a period of time to see if he can
obtain the type of employment he has had in the past. It is
premature to waive the overpayment. The Appeals Tribunal
finds that the claimant does not meet the criteria of TCA 50-7-
303(d) in order to obtain a waiver of overpayment. The
overpayment is not waived.
Mitchell appealed the Appeals Tribunal’s decision to the Board of Review. The
Board of Review adopted the findings of fact and decision of the Appeals Tribunal and
affirmed the Appeals Tribunal’s decision, denying Appellant’s request for a waiver of the
overpayment. Mitchell thereafter filed a petition to rehear which was denied by the Board
of Review. Pursuant to T.C.A. § 50-7-304(i), Mitchell filed a petition for certiorari in
chancery court seeking judicial review of the Board’s decision. The chancery court
dismissed Mitchell’s petition for certiorari and affirmed the decision of the Board of Review,
denying Mitchell’s request for a waiver of the overpayment.
LAW
The two issues before this Court are as follows:
1) Whether the chancery court erred in affirming the decision of the Board of
Review, denying Appellant’s request for waiver of overpayments; and
2) Whether the chancery court erred in admitting additional evidence in the hearing
on Appellant’s petition for certiorari.
The standard of review of this Court and of the chancery court is set forth in T.C.A.
§ 50-7-304(i) which states in part as follows:
(2) The chancellor may affirm the decision of the board or the
chancellor may reverse, remand or modify the decision if the
rights of the petitioner have been prejudiced because the
administrative findings, inferences, conclusions or decisions
are:
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(A) In violation of constitutional or statutory provisions;
(B) In excess of the statutory authority of the agency;
(C) Made upon unlawful procedure;
(D) Arbitrary or capricious or characterized by abuse of
discretion or clearly unwarranted exercise of discretion; or
(E) Unsupported by evidence which is both substantial and
material in the light of the entire record.
(3) In determining the substantiality of evidence, the chancellor
shall take into account whatever in the record fairly detracts
from its weight, but the chancellor shall not substitute the
chancellor's judgment for that of the board of review as to the
weight of the evidence on questions of fact. No decision of the
board shall be reversed, remanded or modified by the
chancellor unless for errors which affect the merits of the final
decision of the board.
In reviewing an administrative decision, a court shall not substitute its judgment for
that of the agency as to the weight of the evidence on questions of fact. Southern Ry. Co.
v. State Bd. of Equalization, 682 S.W.2d 196, 199 (Tenn. 1984). Factual issues are
reviewed based upon a standard of substantial and material evidence. Id; CF Industries
v. Tennessee Public Service Commission, 599 S.W.2d 536, 540 (Tenn. 1980). Substantial
and material evidence has been defined as “such relevant evidence as a reasonable mind
might accept to support a rational conclusion and such as to furnish a reasonably sound
basis for the action under consideration.” Southern Ry. Co., 682 S.W.2d at 199; Pace v.
Garbage Disposal District of Washington County, 390 S.W.2d 461, 463 (Tenn. 1965);
Sweet v. State Tech. Institute at Memphis, 617 S.W.2d 158, 161 (Tenn. Ct. App. 1981).
If substantial and material evidence exists to support the agency’s decision, we are limited
to a review of the questions of law presented. Perryman v. Bible, 653 S.W.2d 424, 429
(Tenn. Ct. App. 1983); Irvin v. Binkley, 577 S.W.2d 677, 678 (Tenn. Ct. App. 1978).
A claimant shall be disqualified from benefits if the claimant was discharged from
work due to misconduct connected with the claimant’s work. T.C.A. § 50-7-303(a)(2).
Although the statute does not define work-connected misconduct, the courts have been
left with the authority interpret its meaning on a case-by-case basis. Wallace v. Stewart,
559 S.W.2d 647, 648 (Tenn. 1977); Troutt v. Carl K. Wilson Co., 410 S.W.2d 177, 180
(Tenn. 1966); Armstrong v. Neel, 725 S.W.2d 953 (Tenn. Ct. App. 1986); Jackson v. Bible,
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611 S.W.2d 588, 590-91 (Tenn. Ct. App. 1980). In order to come within the scope of the
statute, the work-connected misconduct must amount to a breach of duty owed to the
employer. Weaver v. Wallace, 565 S.W.2d 867, 870 (Tenn. 1978); Armstrong, 725
S.W.2d at 955. Moreover, the fault of the employee must be considered when determining
whether an employee has engaged in misconduct connected with work. McClellan v.
Bible, 699 S.W.2d 555 (Tenn. 1985); Armstrong, 725 S.W.2d at 955.
In the present case, Mitchell was named in two counts of an indictment for receiving
monetary kickbacks from collection agencies. Appellant was later arrested by FBI officials
while at work on May 3, 1993. An FBI investigation uncovered two checks made payable
to Mitchell from collection agencies named in the indictment for one-third of the amount
that NOMA had paid the collection agencies two days earlier. After investigating the
allegations against Mitchell, NOMA questioned Mitchell concerning certain irregularities in
the files that Mitchell was required to generate and maintain. Mitchell, however, did not
cooperate with NOMA in answering their questions concerning his involvement in this
matter. Based upon the aforementioned evidence, we conclude that there is substantial
and material evidence supporting the chancellor’s decision, denying Mitchell’s request for
a waiver of the overpayment pursuant to T.C.A. § 50-7-303(a)(2) due to work-connected
misconduct.
Mitchell also argues that the decision of the chancery court should be reversed on
the ground that the chancery court admitted into evidence three additional exhibits which
were not considered by the Appeals Tribunal or the Board of Review. Specifically, the
chancellor admitted copies of checks received by Mitchell from various collection agencies,
a portion of Mitchell’s deposition from a separate civil action and portions of the transcript
from Mitchell’s hearing before the Appeals Tribunal.
It is the duty of the chancery court to review the record of the proceedings before
the Board of Review and to determine whether there is any evidence in the record to
sustain the Board’s findings of fact; and if there is sufficient evidence, it is the chancellor’s
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duty to apply the applicable law to those findings. Cawthron v. Scott, 400 S.W.2d 240,
242-43 (Tenn. 1966); Irvin v. Binkley, 577 S.W.2d 677, 679 (Tenn. Ct. App. 1978).
Consideration of additional evidence not properly before the Appeals Tribunal and the
Board of Review is, therefore, beyond the chancellor’s scope of review. Id.
We note, however, that no decision of the Board of Review “shall be reversed,
remanded or modified by the chancellor unless for errors which affect the merits of the final
decision of the board.” T.C.A. § 50-7-304(i)(3). Similarly, T.R.A.P. 36(b) states that a final
judgment shall not be set aside unless an “error involving a substantial right more probably
than not affected the judgment or would result in prejudice to the judicial process.” See
Keith v. Murfreesboro Livestock Market, Inc., 780 S.W.2d 751, 757-58 (Tenn. Ct. App.
1989) (stating that a judgment shall be reversed only for errors affecting the final
judgment).
Notwithstanding the fact that the chancellor admitted into evidence three additional
exhibits which were not before the Appeals Tribunal or the Board of Review, there is
abundant evidence revealing that Appellant breached his fiduciary duties of trust and
loyalty to his employer; thus, Mitchell’s actions come squarely within the purview of work-
connected misconduct as defined in T.C.A. § 50-7-303(a)(2). The chancellor’s admission
of the additional exhibits did not affect the outcome of the proceedings and was, therefore,
harmless error.
The decision of the chancery court is hereby affirmed. Costs on appeal shall be
taxed to the Appellant for which execution may issue if necessary.
HIGHERS, J.
CONCUR:
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FARMER, J.
LILLARD, J.
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