O'Day v. McDonnell Douglas Helicopter Co., s. 92-15625

• Decision Date: 26 March 1996
• Docket Number: Nos. 92-15625,92-16512,s. 92-15625
• Parties: 70 Fair Empl.Prac.Cas. (BNA) 615, 67 Empl. Prac. Dec. P 43,964, 64 USLW 2617, 96 Cal. Daily Op. Serv. 2004, 96 Daily Journal D.A.R. 3398 Dennis V. O'DAY, Plaintiff-Appellant, v. McDONNELL DOUGLAS HELICOPTER COMPANY, a Foreign Corporation, Defendant-Appellee. (Two Cases).
• Court: U.S. Court of Appeals — Ninth Circuit

Page 756

79 F.3d 756

70 Fair Empl.Prac.Cas. (BNA) 615,

67 Empl. Prac. Dec. P 43,964, 64 USLW 2617,

96 Cal. Daily Op. Serv. 2004,

96 Daily Journal D.A.R. 3398

Dennis V. O'DAY, Plaintiff-Appellant, v. McDONNELL DOUGLAS HELICOPTER COMPANY, a Foreign Corporation Defendant-Appellee. (Two Cases).

Nos. 92-15625, 92-16512.

United States Court of Appeals, Ninth Circuit.

Argued and Submitted Feb. 7, 1994.

Submission Withdrawn April 12, 1994.

Submission Further Suspended

Nov. 8, 1994.

Resubmitted June 9, 1995.

Decided March 26, 1996.

Francis G. Fanning, Tempe, Arizona, for the plaintiff-appellant.

Tibor Nagy, Jr., Snell & Wilmer, Tucson, Arizona, for the defendant-appellee.

Robert J. Gregory, Attorney, Equal Employment Opportunity Commission, Washington, D.C., for amicus Equal Employment Opportunity Commission, on behalf of the plaintiff-appellant.

Appeal from the United States District Court for the District of Arizona; Paul G. Rosenblatt, District Judge, Presiding.

Before: FLETCHER, KOZINSKI, and TROTT, Circuit Judges.

Opinion by Judge KOZINSKI; Partial Concurrence and Partial Dissent by Judge FLETCHER.

KOZINSKI, Circuit Judge.

We consider whether an employer found to have violated the Age Discrimination in Employment Act, 29 U.S.C. § 621 et seq., can avoid all liability for its discrimination by proving with "after-acquired evidence" that the plaintiff could have been discharged for a legitimate reason.

I

On June 8, 1990, Dennis O'Day was denied a promotion to the position of Lead Engineer at the McDonnell Douglas Helicopter Company's plant in Mesa, Arizona. One month later, he was laid off as part of a general workforce reduction. O'Day was 46 years old, had worked for the company for 14 years, and was convinced he had been denied the promotion and laid off because of his age.

After first exhausting his administrative remedies with the Equal Employment Opportunity Commission, O'Day filed this lawsuit against McDonnell Douglas challenging the promotion denial and layoff. He states four causes of action: (1) discrimination in employment under the Age Discrimination in Employment Act (ADEA), 29 U.S.C. § 621, et seq.; (2) discrimination in employment under the Arizona Civil Rights Act (ACRA), Ariz.Rev.Stat. Ann. § 41-1461 et seq.; (3) breach of contract; and (4) wrongful discharge. ¹

The evening after he was denied the promotion, O'Day returned to the plant and searched his supervisor's office. Ostensibly, he was looking for his own personnel file (to which access was restricted), but while he was rummaging through his supervisor's desk, O'Day came across other documents he found interesting, including his supervisor's promotion recommendations and a handwritten list ranking employees for layoff (a so-called "totem" list). These documents O'Day found in a file that was clearly not meant for general inspection. Not only was the file kept in a closed drawer in his supervisor's desk, but it contained notes and memoranda about sensitive personnel matters and was prominently marked "personal/sensitive." Undaunted, O'Day photocopied the handwritten "totem" list along with several other documents, and later showed them to another employee who had been slated for layoff. ²

It was not until after discovery began that McDonnell Douglas learned of O'Day's misconduct. McDonnell Douglas immediately converted O'Day's "layoff" status to "terminated," and filed for summary judgment on the grounds that O'Day's misconduct absolved the company of all liability for its alleged discrimination. The district court assumed for purposes of this motion that McDonnell Douglas had in fact discriminated against O'Day, and concluded there was no genuine issue of material fact that McDonnell Douglas would have fired O'Day had it learned of the misconduct earlier. Rejecting O'Day's contention that his conduct could not legally form the basis for discharge because it was protected activity under the ADEA's "opposition clause," 29 U.S.C. § 623(d), the district court applied the after-acquired evidence doctrine first developed in Summers v. State Farm Mut. Auto. Ins. Co., 864 F.2d 700 (10th Cir.1988), and held that O'Day was barred by his own wrongdoing from obtaining any remedy for McDonnell Douglas' discrimination. The district court therefore granted summary judgment in favor of McDonnell Douglas.

On appeal, we consider three issues: 1) whether the after-acquired evidence of O'Day's misconduct absolves McDonnell Douglas of all liability for its discrimination; 2) whether McDonnell Douglas has carried its burden at summary judgment of proving that it would have discharged O'Day had it learned of his misconduct earlier; and 3) whether O'Day's conduct in stealing sensitive personnel files was protected activity under the ADEA's opposition clause.

II

After one false start, see Milligan-Jensen v. Michigan Tech. Univ., 975 F.2d 302 (6th Cir.1992), cert. granted, 509 U.S. 903, 113 S.Ct. 2991, 125 L.Ed.2d 686 (1993), cert. dismissed, --- U.S. ----, 114 S.Ct. 22, 125 L.Ed.2d 773 (1993), the Supreme Court has provided some much-needed guidance as to how after-acquired evidence of employee wrongdoing should be treated in employment discrimination cases. ³ In McKennon v. Nashville Banner Publishing Co., --- U.S. ----, 115 S.Ct. 879, 130 L.Ed.2d 852 (1995), the Court considered a factual scenario very similar to that presented here. A longtime employee of the Banner Publishing Company sued the company claiming she was discharged because of her age in violation of the ADEA. During her deposition, she admitted that she had "copied several confidential documents bearing upon the company's financial condition," and that she had taken these documents as "insurance" in case she was ever discharged. Id. at ----, 115 S.Ct. at 883. Banner asserted that this misconduct, which according to company policy was grounds for discharge, absolved the company of all liability for its unlawful discrimination.

The Supreme Court held that if an employer discharges an employee for a discriminatory reason, later-discovered evidence that the employee could have been discharged for a legitimate reason does not immunize the employer from liability. Id. at ---- - ----, 115 S.Ct. at 884-85. Reasoning that "a violation of the ADEA cannot be ... altogether disregarded," id. at ----, 115 S.Ct. at 884, the Court held that after-acquired evidence of an employee's wrongdoing bears on the specific remedy to be ordered. Id. at ----, 115 S.Ct. at 886.

McKennon did not explicate how after-acquired evidence should be treated in every situation, leaving this issue to "be addressed by the judicial system in the ordinary course of further decisions." Id. The Court did hold, however, that after-acquired evidence of wrongdoing generally limits an employee's remedy in three significant ways. If an employer discovers that the plaintiff committed an act of wrongdoing and can establish that the "wrongdoing was of such severity that the employee in fact would have been terminated on those grounds alone if the employer had known of it at the time of the discharge," id. at ---- - ----, 115 S.Ct. at 886-87, the employer does not have to offer reinstatement or provide front pay, and only has to provide backpay "from the date of the unlawful discharge to the date the new information was discovered," id. at ----, 115 S.Ct. at 886.

McKennon places the burden of proof with respect to this issue on the employer, carefully articulating that the employer must establish not only that it could have fired an employee for the later-discovered misconduct, but that it would in fact have done so. Id.; accord Reed v. AMAX Coal Co., 971 F.2d 1295, 1298 (7th Cir.1992). This burden comports with the well-established rule in mixed-motive cases, where the burden rests on the employer to prove by a preponderance of the evidence that it would have discharged the employee (or taken whatever adverse action is at issue) regardless of its discriminatory motive. See Price Waterhouse v. Hopkins, 490 U.S. 228, 258, 109 S.Ct. 1775, 1794-95, 104 L.Ed.2d 268 (1989). The inquiry focuses on the employer's actual employment practices, not just the standards established in its employee manuals, and reflects a recognition that employers often say they will discharge employees for certain misconduct while in practice they do not. As the Supreme Court stated in Price Waterhouse, "proving that the same decision would have been justified ... is not the same as proving that the same decision would have been made." Id. at 252, 109 S.Ct. at 1791-92 (internal quotation marks omitted).

McKennon left open whether the preponderance of the evidence standard applicable in mixed-motive cases also applies in the after-acquired evidence context. Nowhere in McKennon does the Supreme Court suggest that employers bear a particularly heavy burden in this context; throughout the opinion the Court refers only to what employers must "establish." Relying on our decision in Nanty v. Barrows Co., 660 F.2d 1327, 1333 (9th Cir.1981), O'Day nevertheless argues that we should require McDonnell Douglas to come forward with clear and convincing evidence that it would have discharged him for his misconduct. This we decline to do.

Nanty held that an employer who had an illegal motive for an employment decision could limit the employee's remedy by providing clear and convincing evidence that it would have made the same decision apart from the illegal motive. Id. The clear-and-convincing standard was thoroughly rejected in Price Waterhouse, however; there a majority of the Supreme Court held that an employer who had an illegal motive for an employment decision could avoid liability outright if it showed by only a preponderance of the evidence that it would have made the same decision apart from the illegal motive. 490 U.S. at 258, 109 S.Ct. at 1794-95 (plurality opinion); id. at 259-60, 109 S.Ct. at 1795-96 (White, J., concurring); id. at 261, 109 S.Ct. at...