Opinion
NO. 4:04-cv-00040-DFH-WGH.
July 29, 2004.
ENTRY ON PLAINTIFF'S MOTION FOR LEAVE TO FILE SUPPLEMENTAL COMPLAINT
Plaintiff Peggy Marie Harper has moved for leave to file a supplemental complaint. She alleges that defendant Realmark Corporation retaliated against her in violation of Title VII of the Civil Rights Act of 1964 by filing frivolous counterclaims against her in this suit. Realmark opposes the motion, arguing that filing counterclaims in this lawsuit cannot, as a matter of law, amount to an act of retaliation under Title VII. Although such claims are likely to be rare, the court cannot say, as a matter of law on the pleadings alone, that filing counterclaims could never amount to unlawful retaliation. Accordingly, plaintiff's motion is granted.
Discussion
Plaintiff Harper alleges that while she was an employee of Realmark from January 2001 to January 2003, supervisor Rick Anzalone (also a defendant here) made unwanted advances toward her. According to Harper, this behavior escalated in the fall of 2002, and when she complained to the owner of the company, she was constructively discharged.Harper filed a complaint alleging that defendants violated Title VII and asserting various Indiana state tort law claims. Defendants' answer denied the claims and asserted several affirmative defenses. Realmark then amended its answer as of right to assert four counterclaims against Harper arising from her employment with Realmark. Harper has responded to Realmark's counterclaims by seeking leave under Federal Rule of Civil Procedure 15(d) to supplement her complaint to assert an additional claim of retaliation.
Under Rule 15(d) of the Federal Rules of Civil Procedure, a court may allow a party to serve a supplemental pleading to set forth "transactions or occurrences or events which have happened since the date of the pleading sought to be supplemented." Leave to supplement is not automatic. See Glatt v. Chicago Park Dist., 87 F.3d 190 (7th Cir. 1996) (affirming denial of leave to file supplemental pleading that appeared to be belated effort to complicate and prolong litigation). A court may consider several factors in granting or denying a motion for leave to file a supplemental pleading, including undue delay by the moving party, the moving party's good or bad faith, the moving party's motive to delay the case, the moving party's failure to cure deficiencies by previous amendments, undue prejudice to the opposing party, or futility of amendment. Id. at 194; Foman v. Davis, 371 U.S. 178, 182 (1962) (reversing denial of leave to amend where no such factors were present); Perrian v. O'Grady, 958 F.2d 192, 195 (7th Cir. 1992) (affirming denial of leave to amend).
Although Foman involved Rule 15(a), the same standard applies to Rule 15(d). Glatt, 87 F.3d at 194; Jones v. Hamelman, 869 F.2d 1023, 1026 (7th Cir. 1989).
Harper has not delayed at all in seeking leave to supplement. Realmark's only argument against the supplement is its assertion that the retaliation claim would be futile. At this stage of the proceedings, an amendment would be futile if the proposed claim could not survive a motion to dismiss for failure to state a claim. Peoples v. Sebring Capital Corp., 209 F.R.D. 428, 430 (N.D. Ill. 2002) (allowing amendment despite arguments that amended claims could not survive summary judgment).
Under Rule 12(b)(6), a court may dismiss a case "for failure to state a claim upon which relief may be granted." Fed.R.Civ.P. 12(b)(6). A complaint should not be dismissed for failure to state a claim "unless no relief could be granted `under any set of facts that could be proved consistent with the allegations.'" Nance v. Vieregge, 147 F.3d 589, 590 (7th Cir. 1998), quoting Hishon v. King Spalding, 467 U.S. 69, 73 (1984). If it is possible to hypothesize any set of facts consistent with the complaint that would entitle the plaintiff to relief, dismissal for failure to state a claim is inappropriate. Veazey v. Communications Cable, Inc. 194 F.3d 850, 854 (7th Cir. 1999); see generally Conley v. Gibson, 355 U.S. 41, 45-46 (1957).
At the pleading stage, the court cannot say that Harper's claim for retaliation under Title VII fails to state a claim for relief. Title VII prohibits an employer from retaliating against an employee who has "opposed any practice made an unlawful employment practice by this subchapter or . . . has made a charge, testified, assisted, or participated in any manner in an investigation, proceeding or hearing" under the statute. See 42 U.S.C. § 2000e-3(a). To prevail on a claim of retaliation a plaintiff must show: (1) she engaged in statutorily-protected expression; (2) she suffered an adverse action by her employer; and, (3) there is a causal link between the protected expression and the adverse action. Dunning v. Simmons Airlines, 62 F.3d 863, 869 (7th Cir. 1995). Harper has alleged these elements with respect to Realmark's filing of what she claims are frivolous counterclaims in this post-termination lawsuit.
Realmark's first argument in opposition is that Harper has failed to allege that the retaliation caused any impairment in her ability to pursue employment. The Seventh Circuit has held that a former employee can sue under Title VII for post-employment acts of retaliation. The earlier cases reaching that result referred to acts that impinge on future employment prospects or otherwise have a nexus to employment. See, e.g., Ruedlinger v. Jarrett, 106 F.3d 212, 214 (7th Cir. 1997) (reversing dismissal of claim for post-termination retaliation); Veprinsky v. Fluor Daniel, Inc., 87 F.3d 881, 891 (7th Cir. 1996) (reversing summary judgment on similar claims); see generally Robinson v. Shell Oil Co., 519 U.S. 337 (1997) (holding that former employee may bring action under Title VII's retaliation provision).
More recently, however, the Seventh Circuit has made it clear that an "employment impairment" is not necessary for a retaliation action. In Aviles v. Cornell Forge Co., 183 F.3d 598 (7th Cir. 1999), the court reversed summary judgment that had been granted on the theory that the retaliation (allegedly filing a false police report about the plaintiff) had no effect on employment conditions. The Seventh Circuit observed a trend in the Seventh Circuit suggesting "retaliatory activity in the pre-termination context need not be job related," and also noted that Veprinsky had observed that even after termination, some acts of retaliation need not be job-related. Id. at 605, citing 87 F.3d at 892. In Herrnreiter v. Chicago Housing Authority, 315 F.3d 742, 745-46 (7th Cir. 2002), the Seventh Circuit made a point of instructing district courts and parties that retaliation claims do not require the plaintiff to establish that there was an adverse employment action. The court observed that "the provision regarding retaliation may intentionally be broader, since it is obvious that effective retaliation against employment discrimination need not take the form of a job action." Id. at 746, citing McDonnell v. Cisneros, 84 F.3d 256, 259 (7th Cir. 1996).
More recently in Ishkhanian v. Forrester Clinic S.C., 2003 WL 21479072 (N.D. Ill. 2003), Judge Kennelly denied a motion to dismiss a claim for retaliation alleging that the plaintiff's former employer retaliated against her by filing a civil action. Relying on Robinson v. Shell Oil, Herrnreiter, Aviles, Veprinsky, and McDonnell, Judge Kennelly held that an employer's post-termination civil lawsuit could amount to an act of unlawful retaliation. 2003 WL 21479072 at *2. This court agrees. The absence of an alleged "employment impairment" does not doom Harper's retaliation claim.
Realmark's second argument against the retaliation claim is that Harper should be required to meet a heightened pleading standard by substantiating her claim in some way, perhaps with more detailed pleading and perhaps even evidence. To support this argument, Realmark relies on Glatt v. Chicago Park Dist., 87 F.3d 190, 194 (7th Cir. 1996). In Glatt, however, the effort to supplement the complaint came very late in the case and appeared to be a transparent attempt to prolong and complicate the litigation. The same cannot be said here, where the only substantial reason offered by Realmark for denying leave to supplement the complaint is the argument that the new claim would be futile.
The Seventh Circuit and other district courts have recognized in many cases that post-termination lawsuits can amount to unlawful retaliation, though the courts' opinions have predicted that successful claims of this type are likely to be rare. See Steffes v. Stepan Co., 144 F.3d 1070, 1075 (7th Cir. 1998) (although "some actions taken in the course of litigation could conceivably constitute retaliation . . . it will be the rare case in which conduct occurring within the scope of litigation constitutes retaliation" prohibited by Title VII); Urquiola v. Linen Supermarket, 1995 WL 266582, at *1 (M.D. Fla. 1995) (denying motion to dismiss retaliation claim based on defendant's filing of lawsuit in state court); Harmar v. United Airlines, 1996 WL 199734, at *1 (N.D. Ill. 1996) (Hart, J.) (collecting cases but granting motion to dismiss retaliation claim based on filing of affirmative defense); Cozzi v. Pepsi-Cola Bottlers, 1997 WL 312048, at *3 (N.D. Ill. 1997) (Gettleman, J.) (recognizing that filing lawsuit could support claim for retaliation, but dismissing without prejudice for failure to allege causal link between the protected activity and the filing of the lawsuit). Such claims may be successful only rarely, but the pleading stage is not the time for sorting the sheep from the goats.
Realmark's third argument is that, even if an employer's filing of a post-termination lawsuit could theoretically support a claim, filing a counterclaim in a pending lawsuit cannot. Case law on this specific question is more scarce, and divided.
In Shafer v. Dallas County Hosp. Dist., 1997 WL 667933 (N.D. Tex. 1997), the court denied a motion for summary judgment on a claim of Title VII retaliation based on a defendant's counterclaim. The court, citing Cozzi and other cases, noted that is was "well established that filing a retaliatory lawsuit may be actionable under Title VII." Id. at *4. The Shafer court then concluded, without further explanation, that counterclaims may also be the basis of retaliation claims. Id.
Whether this holding in Shafer is viable under Fifth Circuit law is in some doubt, but it is consistent with Seventh Circuit law. In Hernandez v. Crawford Bldg. Material Co., 321 F.3d 528 (5th Cir. 2003), the court reversed denial of a motion for judgment as a matter of law for defendant. Plaintiff won a jury verdict on a retaliation claim based on defendant's filing of a counterclaim. In reversing, the Fifth Circuit emphasized its narrow view of impermissible retaliation, stating: "In the Fifth Circuit, only an `ultimate employment decision' by an employer can form the basis for liability for retaliation." Id. at 531. This narrow view of retaliation is not consistent with the Seventh Circuit law cited above or the majority of circuits, however, and even the Fifth Circuit has questioned its validity. See Rosania v. Taco Bell of America, Inc., 303 F. Supp. 2d 878, 885 (N.D. Ohio 2004) (analyzing the holding in Hernandez and quoting Judge Dennis' concurring in opinion in Hernandez, 321 F.3d at 533; Judge Dennis "urge[d] that the en banc court should reconsider our rule that `only an "ultimate employment decision" by an employer can form the basis for liability for retaliation under Title VII.").
In E.E.O.C. v. K J Management, 2000 WL 34248366 at *3 (N.D. Ill. 2000), Judge Kocoras granted a motion to dismiss a retaliation claim based on the filing of a counterclaim in a pending federal lawsuit. Judge Kocoras disagreed with Shafer's extension of the retaliatory lawsuit principle to counterclaims:
Raising a counterclaim does not cause the plaintiff to incur the expense of hiring attorneys to respond to a lawsuit since plaintiff is generally already represented in the suit, which he brought. Cf. id. Moreover, filing a counterclaim is unlikely to chill plaintiffs' exercise of their rights to challenge discrimination under Title VII. The purpose of § 704(a) of Title VII is to prohibit employer retaliation against an employee who has made a charge with the EEOC. See [ EEOC v. Virginia Carolina Veneer, 465 F. Supp. 775, 777-78 (W.D. Va. 1980)]. Thus, § 704(a) protects an employee's right to challenge discrimination under Title VII. See [ EEOC v. Levi Strauss Co., 515 F. Supp. 640, 642-43 (N.D. Ill. 1981)]. When employers file a counterclaim, however, plaintiffs have already made their charges with the EEOC and initiated a lawsuit against their employer before any counterclaim is even brought. The filing of a counterclaim in an action already commenced by an employee will not chill that employee's legal enforcement of Title VII rights.
* * *
We respectfully disagree with the conclusion [in Shafer] that the filing of a counterclaim, without more, is an adverse employment action and may serve as a basis for retaliation under Title VII. Fundamental differences exist between the initiation of a law suit and a counterclaim. Moreover, these differences lead the Court to conclude that the filing of a counterclaim generally would not qualify as an adverse action by an employer or former employer and serve as a basis for a retaliation claim. At the same time, however, the Court is not prepared to foreclose the possibility that a counterclaim may in the "rare case" serve as the basis for a retaliation claim. Cf. Steffes, 144 F.3d at 1075.
Plaintiff-Intervenors' case does not allege that rare case. It is not enough for a plaintiff to simply allege that the employer filed a counterclaim in an action where Title VII rights are at issue because the filing of counterclaims is not inherently retaliatory or an adverse employment action. The filing of the counterclaim in this case is not alleged to be an adverse action. Plaintiff-Intervenors were already involved in litigation brought by themselves against Guardian and did not have to newly seek counsel. Moreover, Plaintiff-Intervenors have alleged no rights that were impaired or chilled by the filing of Guardian's counterclaim. As such, Plaintiff-Intervenors have failed to allege that the filing of the counterclaim was an adverse action taken by Guardian, and they have further failed to allege any adverse action taken by Guardian.
2000 WL 34248366, at *3-5.
The reasoning of KJ Management does not persuade this court that Harper's retaliation claim should be dismissed, at least at the pleading stage. First, the court in KJ Management chose not to declare flatly that filing counterclaims in a lawsuit could never support a claim for retaliation. In this case, Harper's proposed retaliation claim alleges that Realmark's counterclaims are frivolous, were "manufactured, designed, and filed for the sole purpose of dissuading plaintiff from pursuing her claims against Realmark," and were brought for a retaliatory purpose, in bad faith, without merit, and "to vexatiously protract this litigation." She also alleges that the counterclaims have caused her to suffer various forms of loss, including attorney fees needed to defend the allegedly frivolous counterclaims. Such allegations would appear to survive scrutiny under the reasoning of KJ Management.
Second, the KJ Management court might not have given sufficient weight to the possibility that counterclaims can cause a plaintiff to incur significant expenses and risks. In this court's experience with attorneys and clients in employment discrimination cases, it is common for plaintiffs' attorneys to exclude the defense of counterclaims from the scope of their standard contingent-fee agreements. A counterclaim can therefore add substantially to a plaintiff's out-of-pocket expenses during litigation. And as noted, in this case, plaintiff has alleged that the counterclaims have caused her to incur additional attorney fees. The court must accept that allegation as true at this stage.
Third, this court does not share the confidence of the KJ Management court as to whether frivolous, retaliatory counterclaims could dissuade a plaintiff from pursuing her case. She may still face the expense of litigating those claims, as well as the risk that a court might not share her view that the counterclaims are frivolous.
For these reasons, and in light of the generous standard that applies at the pleading stage, plaintiff's motion for leave to file a supplement to her complaint is hereby granted. The tendered supplement shall be deemed filed today, and defendants may file any further response no later than August 20, 2004.
So ordered.