Baralt v. Nationwide Insurance

• Decision Date: 08 March 2001
• Docket Number: GONZALEZ-PEREZ,00-1741,CANABAL-DURAN,BARALT-PENA,GONZALEZ-CANABE,00-2107,00-1742,P,Nos. 00-1453,PENA-AVILES,s. 00-1453
• Citation: 251 F.3d 10
• Parties: (1st Cir. 2001) MANUEL A. BARALT; LIZETTE; CONJUGAL PARTNERSHIP; JUAN; MONSERRATE; CONJUGAL PARTNERSHIPlaintiffs-Appellees/Cross-Appellants, v. NATIONWIDE MUTUAL INSURANCE COMPANY, Defendant-Appellant/Cross-Appellee, NATIONWIDE INSURANCE COMPANY; NATIONWIDE MUTUAL FIRE INSURANCE COMPANY; NATIONWIDE LIFE INSURANCE COMPANY; NATIONWIDE GENERAL INSURANCE COMPANY; NATIONWIDE PROPERTY AND CASUALTY INSURANCE COMPANY; NATIONWIDE GROUP OF COMPANIES; WILLIAM P. DEMENO, Defendants. Heard
• Court: U.S. Court of Appeals — First Circuit

Page 10

251 F.3d 10 (1st Cir. 2001)

MANUEL A. BARALT; LIZETTE PENA-AVILES; CONJUGAL PARTNERSHIP BARALT-PENA; JUAN GONZALEZ-PEREZ; MONSERRATE CANABAL-DURAN; CONJUGAL PARTNERSHIP GONZALEZ-CANABEL, Plaintiffs-Appellees/Cross-Appellants, v. NATIONWIDE MUTUAL INSURANCE COMPANY, Defendant-Appellant/Cross-Appellee, NATIONWIDE INSURANCE COMPANY; NATIONWIDE MUTUAL FIRE INSURANCE COMPANY; NATIONWIDE LIFE INSURANCE COMPANY; NATIONWIDE GENERAL INSURANCE COMPANY; NATIONWIDE PROPERTY AND CASUALTY INSURANCE COMPANY; NATIONWIDE GROUP OF COMPANIES; WILLIAM P. DEMENO, Defendants.

Nos. 00-1453, 00-1741, 00-1742, 00-2107

United States Court of Appeals For the First Circuit

Heard March 8, 2001

Decided May 24, 2001

APPEALS FROM THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF PUERTO RICO

[Hon. Juan M. Perez-Gimenez, U.S. District Judge]

[Copyrighted Material Omitted] Sheldon H. Nahmon, with whom Arturo Diaz-Angueira and Roberto Feliberti were on brief, for Nationwide.

Ruben T. Nigaglioni, with whom Antonio A. Arias-Larcada was on brief, for appellees/cross-appellants.

Before Selya, Circuit Judge, Coffin and Campbell, Senior Circuit Judges.

COFFIN, Senior Circuit Judge.

A jury found that appellant Nationwide Mutual Insurance Company ("Nationwide") terminated appellees Manual Baralt and Juan Gonzalez-Perez ("Gonzalez") because of their ages, in violation of both the Age Discrimination in Employment Act, 29 U.S.C. §§ 621-634 ("ADEA"), and Puerto Rico Law 100, P.R. Laws Ann. tit. 29, §§ 146-51 ("Law 100"). The two men and their wives were awarded a total of more than $6 million in damages and attorney's fees. See Baralt v. Nationwide Mut. Ins. Co., 86 F. Supp. 31, 42 (D.P.R. 2000). On appeal, Nationwide does not challenge the jury's determination that the company acted unjustifiably in terminating appellees, but contends that the evidence failed to support a finding of age discrimination. After a careful review of the record and case law, we agree, and therefore reverse.

I. Factual Background

In the spring of 1993, Nationwide began an investigation into allegations of fraudulent claims practices by one of its adjusters, Quinones, after appellee Baralt, claims manager in the Puerto Rico office ("NPRO"), reported "irregularities" to company headquarters. Nationwide assigned Joanne McGoldrick, an investigator in its corporate security department, to research the allegations.

During her investigation, which included three visits to Puerto Rico between October 1993 and April 1994,¹ McGoldrick learned of unrelated improper conduct allegedly committed by the vice president of the office, Enrique Lopez. Those improprieties primarily concerned the unauthorized use of company cars, or "pool" cars, and salvage vehicles, including the regular borrowing of pool cars by Lopez's sons and "sales" of salvage vehicles to NPRO employees who had not paid for them. Lopez also was accused of procuring an insurance policy at less than full cost for a Plymouth Sundance used by his son in Ohio by falsely representing that it was being driven by his wife in Puerto Rico.

McGoldrick initially verified the accusations against Lopez by speaking with NPRO's Sales and Marketing Manager, Blanca Robles, and then further investigated the claims during her April visit to Puerto Rico. Nationwide maintains that appellees were terminated in May 1994 because they interfered with the investigation into Lopez's conduct and because of their involvement in certain of the asserted improper practices. The company claims that Gonzalez helped Lopez to obtain the Sundance insurance policy and also was aware of, and facilitated, the use of pool cars by Lopez's sons. Baralt was linked to the alleged improprieties because he was in charge of salvage vehicles for NPRO.

Baralt, NPRO's claims manager, was 49 and had been employed by Nationwide for 25 years; Gonzalez, who was 60, had worked for the company for 28 years and was manager of the personal and commercial lines underwriting department. Baralt and Gonzalez were two of the six high-ranking employees at NPRO known as the "Cabinet." Two others -- Lopez and the company's comptroller, Luis Flores Dieppa ("Flores") -- also were terminated for improper conduct. The remaining two Cabinet members, one of whom was Robles, left the company about a year after the terminations. The only evidence presented at trial explaining their departures was Robles's testimony that she took advantage of the company's early retirement plan. Five non-Cabinet employees also were terminated.

At trial, in addition to presenting evidence of appellees' involvement in practices the company deemed improper, Nationwide attempted to show that both men interfered in the investigation after being instructed not to do so. McGoldrick accused Gonzalez of intimidating two female employees, whom she had found crying.² She also reported that on multiple occasions she found Gonzalez standing near an office where she was interviewing employees. In a report admitted as a trial exhibit, McGoldrick stated that another employee told her that Baralt had contacted all of the claims division employees who possessed salvage vehicles "and warned them of the scope of our investigation" and advised them not to tell the truth or they would lose their jobs. She further reported that other employees had stated that Baralt had discussed the interview he had with investigators even though he had been told expressly of the requirement of confidentiality.³

Appellees sought to rebut Nationwide's evidence of improper conduct in a variety of ways. They presented evidence that there was no company policy against after-hours use of pool cars by family members,⁴ and that, moreover, giving Lopez's sons use of cars in the evening served to protect the vehicles from possible theft from the unsecured company lot, which was in a high-crime area. Although Gonzalez acknowledged arranging the sons' use of the pool cars, he testified that he did so upon instructions from another Cabinet member, Rafael Gonzalez, and further testified that it was Rafael who had responsibility over the pool vehicles. In an effort to negate Nationwide's suggestion that company officials permitted employees to acquire salvage vehicles at no cost, plaintiffs also presented evidence that the company's books showed the debts for the cars. Testimony elicited on behalf of Gonzalez distanced him from the insurance policy obtained by Lopez on the Plymouth Sundance by suggesting that it was not issued under his authority, and there also was evidence indicating that the policy was not improper.⁵ As noted, both plaintiffs denied that they had breached the confidentiality of the investigation. Gonzalez defended his frequent appearance near the room where McGoldrick was conducting interviews by explaining that he was using the nearby copy machine, not intimidating employees.

Appellees also emphasized the abruptness and insensitivity exhibited in the circumstances leading up to and accompanying plaintiffs' terminations. After McGoldrick reported on her investigation to Nationwide headquarters, Lucas, the Human Resources officer, was sent to Puerto Rico with final decision-making authority. He had not reviewed plaintiffs' personnel files, claiming that he did not want his decision to be influenced by anything in the files and noting that even a thirty-year record of good employment could be wiped out by one serious improper act. He interviewed each plaintiff for only a brief time, and, at the end of the interviews, pronounced his decision to terminate. Security personnel were standing by to escort each plaintiff with his personal belongings out of the building.

The sum total of evidence relating to age is the following:

-- Baralt, 49, was replaced by Morales, 47. Although Baralt at first testified that Morales was replaced by "a much younger man," he later admitted that he had no idea why Morales left the company or whether his replacement was younger or much younger.

-- Gonzalez, 60, was replaced by Guzman, 43.

-- Lopez, the NPRO vice president, 54, was temporarily replaced by Robles, also 54, indeed three weeks older than Lopez. His permanent replacement was Jack Wood, whose age was not made of record.

-- Flores, NPRO's comptroller, was 44 when he was terminated. There is no evidence of his replacement's age.

-- The two Cabinet members who were not fired were Robles, 54, and Rafael Gonzalez, 57.

-- In addition to the above four Cabinet members, there were five subordinate employees discharged for misappropriation of vehicles. Nothing appears in the record concerning their ages or those of any replacements.

When Gonzalez was asked directly what support he had for his age discrimination claim, he replied:

Well, based on the performance that I was realizing or that I was doing, my devotion to the company, the success that the agency was having every year, over 18 long years and always willing to make a maximum effort to the company's benefit, to the benefit of our customers. I was in a good state of health, there was no reason.

The jury nonetheless found that age played a motivating role in the terminations of Gonzalez and Baralt in violation of both the ADEA and Law 100, which prohibits employment discrimination based on a variety of factors, including age.⁶ The jury also returned a verdict for plaintiffs on a third count for unjust dismissal under Puerto Rico's "Law 80," P.R. Laws Ann. tit. 29, §§ 185a-185m, which prohibits discharges "made by the mere whim of the employer or without cause relative to the proper and normal operation of the establishment." Id. at § 185b. The jury awarded Baralt $1 million in non-economic damages and Gonzalez $1.5 million, plus $500,000 to each of their wives. The district court modified these amounts by reducing the wives' damages to $100,000 each and by doubling the compensatory awards, as prescribed by Law 100, to $2 million (for Baralt) and $3 million (for Gonzalez)....