In Celia Greengrass v. International Monetary Systems, Ltd., 2015 WL 137891, (7th Cir. Jan. 12, 2015), the Seventh Circuit relied in part on the fact that an employer identified a former employee by name in its discussion of pending litigation in an SEC filing, along with certain imprudent emails showing a disdain for the EEOC process and animus toward the former employee, to find that she had stated a claim for retaliation.
The case began as a fairly straightforward complaint alleging harassing behavior made by an account executive of International Monetary Systems, Ltd. (IMS) against her general manager in Las Vegas. IMS owns, manages and operates trade exchanges and other related businesses. Trade exchanges, or barter networks, are financial service firms which permit companies and individuals to exchange goods and services utilizing an electronic currency known as trade dollars. IMS’ CEO forwarded the complaint to the alleged harasser by email with the message, “Call me before you explode.” At the time, the employee had been employed for only about eight months, and she quit two months later.
Shortly after she quit on January 20, 2008, the employee filed a discrimination complaint with the Equal Employment Opportunity Commission (EEOC). She alleged that IMS discriminated against her and other female employees because of their sex, and also, discriminated against her because of her national origin (Brazilian). She also alleged that, following her complaint, her supervisor retaliated and forced her to quit, that is, constructively discharged her.
Over the next year or so, the employee secured employment with several different companies. The EEOC charge of discrimination was settled by the parties through the EEOC’s conciliation process after the agency determined there was probable cause to believe the employee was subject to discrimination and retaliation. The settlement, consummated around December 24, 2009, did not require IMS to rehire the employee.
As a publically traded company, IMS was required to file certain annual disclosures with the Security and Exchange Commission (SEC). In particular, item 103 of Security Regulation S-K, requires companies to describe any material legal proceedings, including identifying the principal parties, facts giving rise to the proceedings and the relief sought. Until September 2008, IMS did not specifically name the plaintiffs to any pending litigation in the SEC filings which were made. For the April 2009 filing, IMS did, however, identify plaintiffs in pending litigation, including the employee, and opined the belief that all matters were meritless. At that point, since the employee’s EEOC case had not yet been resolved, there was continuing EEOC activity until its resolution in December 2009.
After leaving IMS, the employee claimed she had multiple employers because she could not maintain regular employment due to the SEC filings. She claimed a Google search of her name drew multiple results regarding IMS’s SEC filings that included her name; and a recruiter informed her she was not employable due to this information.
On September 28, 2010, the employee filed a second EEOC complaint against IMS. Essentially, the employee alleged IMS specifically referred to her by name in its SEC filings to retaliate against her for her prior settled complaint to the EEOC and to preclude her from obtaining new employment. After the EEOC found probable cause to believe IMS engaged in unlawful retaliation, the parties could not conciliate to a settlement, and the employee brought suit in federal court.
Following discovery, the lower court entered summary judgment for IMS, finding the employee had no evidence that the SEC filings had caused her job difficulties. However, the employee appealed, and the Seventh Circuit reversed.
The Seventh Circuit determined a jury was needed to reach conclusions about the cause of the employee’s post-IMS employment problems, i.e., whether IMS would have taken the same actions but for the employee’s EEOC complaint. The court cited company emails, including the one stating the alleged harasser should “call before he exploded,” as circumstantial evidence suggesting disdain for the employee’s claims and the EEOC process. The court also rejected IMS’ assertion that it decided to name individuals in its SEC filings based on advice of its consultants. The Court pointed to the inconsistency in how IMS reported the pending claims in public filings, sometimes with and other times without specifically naming individual plaintiffs, and the proximity of its decision to name plaintiffs and the EEOC’s determination that the employee’s claim had merit, to conclude a jury could find that IMS’ asserted defense was a pretext.
Although one may disagree with the court’s reading of the company employees’ email about the plaintiff, this is a case decided by a respected appellate level federal court that cannot be ignored.
The take-aways are apparent and forewarned is forearmed. As with most things in life, less is more. If comments about pending litigation do not need to be written, they should not be. In fact, if discussion about any pending litigation can be avoided, except with outside counsel, all the better. In that case, privileges can be asserted. Last but not least, if identifying former employees by name can be avoided – then avoid it. Describing a plaintiff as a “current” or “former” employee should be adequate for SEC filing purposes.