Tennessee Supreme Court Abandons McDonnell Douglas Framework At The Summary Judgment Stage In Employment Discrimination And Retaliation Cases

January 2011

In a recent 3-2 decision in Gossett v. Tractor Supply Co., Inc., 320 S.W.3d 777 (Tenn. 2010), the Tennessee Supreme Court made it easier for plaintiffs to defeat a motion for summary judgment in employment discrimination and retaliation cases by abandoning the McDonnell Douglas burden shifting analysis.

Plaintiff Gary Gossett worked for Defendant Tractor Supply Company, Inc. as an Inventory Control Manager in its General Accounting Department. After completing an inventory reserve analysis, the employer’s CFO instructed the Plaintiff to remove products from the inventory reserve. The Plaintiff refused to do so because it would have artificially increased the employer’s quarterly earnings statement in violation of the Securities Exchange Act of 1934 and related federal securities regulations. Approximately one month after he submitted an accurate inventory reserve analysis, the employer terminated the Plaintiff’s employment, purportedly to reduce its workforce.

The Plaintiff filed suit for common law retaliatory discharge based on a violation of public policy. He alleged that his employer fired him for refusing to participate in the CFO’s alleged illegal activity. The trial court granted the employer’s motion for summary judgment because the plaintiff had never reported the alleged illegal activity to anyone, which was an essential element of a cause of action for retaliatory discharge. The Tennessee Court of Appeals reversed the grant of summary judgment.

On appeal to the Tennessee Supreme Court, all five Justices agreed that summary judgment in favor of the employer was inappropriate because the plaintiff introduced sufficient evidence to create a genuine issue of material fact for the trial that the employer’s stated reason for terminating him was pretextual. The Supreme Court also held unanimously that the reporting of an illegal activity is not an essential element of an employee’s claim of retaliatory discharge for refusing to participate in illegal activity.

The three Justice majority went a step further by holding that the McDonnell Douglas framework no longer applies at the summary judgment stage because it is incompatible with Tennessee summary judgment jurisprudence in light of the Court’s decision in Hannan v. Alltell Publishing Co., 270 S.W.3d 1 (Tenn. 2008). In Hannan, the Tennessee Supreme Court held that a party moving for summary judgment must either: (1) affirmatively negate an essential element of the nonmoving party’s claim, or (2) show that the nonmoving party cannot prove an essential element of the claim at trial. In McDonnell Douglas Corp. v. Green, 411 U.S. 792 (1973), the U.S. Supreme Court set forth a procedure in Title VII cases such that if an employee proves a prima facie case of discrimination or retaliation, the employee creates a rebuttable presumption that the employer unlawfully discriminated or retaliated against him or her. The burden of proof then shifts to the employer to provide a legitimate, non-discriminatory reason for the adverse employment action. If the employer satisfies its burden, the rebuttable presumption of discrimination or retaliation “drops from the case.” The burden then shifts to the employee to prove by a preponderance of the evidence that the employer’s reason for the adverse action was not the true reason, but was instead a pretext for discrimination.

In the Gossett opinion, the majority found that the McDonnell Douglas framework can skew the summary judgment analysis in favor of the employer. The framework is particularly ill suited to the analysis of mixed-motive claims.1 In such cases, evidence satisfying the employer’s burden of production under McDonnell Douglas does not necessarily demonstrate that there is no genuine issue of material fact for trial. For example, the employer can satisfy its burden of production by pointing to a legitimate, non-discriminatory reason for the employee’s discharge. However, a legitimate reason for discharge is not always mutually exclusive of a discriminatory or retaliatory motive. In this case, the employer relied on the deposition testimony of its CFO that he fired the Plaintiff to reduce the company’s workforce. This testimony did not show that the workforce reduction was the exclusive reason for the discharge or the absence of a retaliatory motive. It also did not disprove the Plaintiff’s factual allegations. The majority found that an employer can satisfy its burden of production under McDonnell Douglas, but not satisfy its burden of production for summary judgment under Hannan. Applying the McDonnell Douglas framework at the summary judgment stage can result in summary judgment for the employer despite the presence of a genuine issue of material fact for trial.

According to the dissenting opinion, the Court needlessly abandoned the McDonnell Douglas framework in a case where summary judgment was inappropriate even if the framework had been applied. Although the employer’s stated reason for the plaintiff’s termination was a workforce reduction, evidence introduced by the Plaintiff in response to summary judgment created several disputed factual issues. The minority criticized the majority’s opinion for engendering uncertainty among Courts and counsel as to when defendants can obtain summary judgment in employment discrimination and retaliation cases in Tennessee. If proof of a legitimate, nondiscriminatory reason for the adverse employment action can no longer affirmatively negate the causation element of the Plaintiff’s claim, then the Court has foreclosed the most common argument employers make on summary judgment  in these cases. The minority opinion also criticized the majority for sharply reducing the quantum of proof the plaintiff needs to survive summary judgment in such cases, which will cause trial courts to bear the brunt of heavier trial dockets.

Tennessee is now one of only four states to abandon the McDonnell Douglas framework. The Court’s decision should make employment discrimination and retaliation cases and trials more prevalent in Tennessee state courts. However, plaintiff’s attorneys may still choose to file suit in federal court, where McDonnell Douglas still applies, instead of conservative state court jurisdictions. Because summary judgment will be harder for the employer to attain in Tennessee state courts, the settlement value of discrimination and retaliation cases will increase. In cases in which an employee has engaged in protected activity, it is more important than ever for employers to seek preventive counsel before taking adverse action against the employee.

1 The Sixth Circuit already has held that the McDonnell Douglas analysis does not apply to mixed-motive cases. White v. Baxter Healthcare Corp., 533 F.3d 381, 400 (6th Cir. 2008).

FOR MORE INFORMATION, PLEASE CONTACT:
Jeffrey M. Beemer is a member in Dickinson Wright’s
Nashville office and can be reached at 615.620.1719 or
jbeemer@dickinsonwright.com.

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