McKennon v. Nashville Banner Publishing Co.

Facts

For some thirty years, petitioner Christine McKennon worked for respondent Nashville Banner Publishing Company. (McKennon, supra, 513 U.S. at p. 354.) She was discharged, the Banner claimed, as part of a work-force reduction plan necessitated by cost considerations. (Ibid.) McKennon, who was sixty-two years old when she lost her job, believed another reason explained her dismissal — her age — and filed suit in the United States District Court for the Middle District of Tennessee, alleging that her discharge violated the Age Discrimination in Employment Act of 1967. (Ibid.)

The statutory framework. The ADEA, 81 Stat. 602, as amended, 29 U.S.C. § 621 et seq., makes it unlawful for any employer “to discharge any individual or otherwise discriminate against any individual with respect to his compensation, terms, conditions, or privileges of employment, because of such individual’s age.” (McKennon, supra, 513 U.S. at p. 354, quoting 29 U.S.C. § 623(a)(1).) The Act’s substantive, antidiscrimination provisions are modeled on the prohibitions of Title VII, while its remedial provisions incorporate by reference the provisions of the Fair Labor Standards Act of 1938 — a structure that has led the Court to describe the ADEA as “something of a hybrid.” (Id. at p. 357.) When confronted with a violation, a district court is authorized to afford relief “by means of reinstatement, backpay, injunctive relief, declaratory judgment, and attorney’s fees,” and in the case of a willful violation the Act authorizes liquidated damages equal to the back-pay award. (Ibid.; see 29 U.S.C. § 626(b).) The Act further empowers federal courts “to grant such legal or equitable relief as may be appropriate to effectuate the purposes of [the Act].” (McKennon, supra, 513 U.S. at pp. 357–358, quoting 29 U.S.C. § 626(b).)

McKennon sought a variety of legal and equitable remedies available under the ADEA, including back pay. (Id. at p. 354.) In preparing the case, the Banner took her deposition. She testified that, during her final year of employment, she had copied several confidential documents bearing on the company’s financial condition, to which she had access as secretary to the Banner’s comptroller. (Id. at p. 355.) She took the copies home and showed them to her husband; her motivation, she averred, was apprehension that she was about to be fired because of her age, and she removed and copied the documents for “insurance” and “protection.” (Ibid.) A few days after these deposition disclosures, the Banner sent McKennon a letter declaring that her removal and copying of the records violated her job responsibilities, advising her again that she was terminated, and reciting that, had it known of the misconduct, it would have discharged her at once for that reason. (Ibid.)

Procedural history

For purposes of summary judgment, the Banner conceded its discrimination against McKennon. (McKennon, supra, 513 U.S. at p. 355.) The District Court nonetheless granted summary judgment for the Banner, holding that McKennon’s misconduct was grounds for her termination and that neither back pay nor any other remedy was available to her under the ADEA. (Ibid.) The United States Court of Appeals for the Sixth Circuit affirmed on the same rationale. (Ibid.)

The Supreme Court granted certiorari “to resolve conflicting views among the Courts of Appeals on the question whether all relief must be denied when an employee has been discharged in violation of the ADEA and the employer later discovers some wrongful conduct that would have led to discharge if it had been discovered earlier.” (Id. at pp. 355–356.) The Court canvassed the split, contrasting decisions treating after-acquired evidence as a complete bar — including the Sixth Circuit decision below and the Tenth Circuit’s influential opinion in Summers v. State Farm Mutual Automobile Ins. Co. (10th Cir. 1988) 864 F.2d 700 — with decisions from the Third, Seventh, and Eleventh Circuits taking the contrary view. (Id. at p. 356.)

Issue

Where an employee is discharged in violation of the ADEA, and the employer afterward discovers evidence of wrongdoing that would, in any event, have led to the employee’s termination on lawful and legitimate grounds, is the employee barred from all relief under the Act? And if not, how does such after-acquired evidence bear on the specific remedies — reinstatement, front pay, and back pay — that a court may order? (McKennon, supra, 513 U.S. at p. 354.)

Holding

Reasoning

The Court accepted two premises and rejected one legal conclusion. Constrained by summary-judgment procedures, the Court assumed “that the sole reason for McKennon’s initial discharge was her age, a discharge violative of the ADEA,” and further assumed “that the misconduct revealed by the deposition was so grave that McKennon’s immediate discharge would have followed its disclosure in any event.” (McKennon, supra, 513 U.S. at p. 356.) The District Court and Sixth Circuit had found no basis for contesting the latter proposition, and the Court did not question it. (Ibid.) What the Court did question was the “legal conclusion reached by those courts that after-acquired evidence of wrongdoing which would have resulted in discharge bars employees from any relief under the ADEA.” (Ibid.) That ruling, the Court held, “is incorrect.” (Ibid.)

The statute’s remedial purposes foreclose a complete bar. The Sixth Circuit had treated McKennon’s misconduct as “supervening grounds for termination.” (Id. at pp. 356–357.) That “may be so,” the Court allowed, “but it does not follow … that the misconduct renders it ‘irrelevant whether or not [McKennon] was discriminated against.’” (Id. at p. 357.) The ADEA, enacted to eradicate workplace discrimination, “reflects a societal condemnation of invidious bias in employment decisions” and shares with Title VII “a common purpose: ‘the elimination of discrimination in the workplace.’” (Id. at pp. 357–358.) Congress designed the remedial measures in these statutes to serve “as a ‘spur or catalyst’ to cause employers ‘to self-examine and to self-evaluate their employment practices and to endeavor to eliminate, so far as possible, the last vestiges’ of discrimination.” (Id. at p. 358.) Deterrence is one object of the statute and compensation another, and “[t]he private litigant who seeks redress for his or her injuries vindicates both the deterrence and the compensation objectives of the ADEA.” (Ibid.) It would not accord with that scheme “if afteracquired evidence of wrongdoing that would have resulted in termination operates, in every instance, to bar all relief for an earlier violation of the Act.” (Ibid.)

The mixed-motive analogy in Mt. Healthy does not control. The lower courts’ complete-bar rule traced through Summers to Mt. Healthy City Bd. of Ed. v. Doyle (1977) 429 U.S. 274, which the Court held “inapplicable here.” (McKennon, supra, 513 U.S. at p. 359.) Mt. Healthy “addressed a mixed-motives case, in which two motives were said to be operative in the employer’s decision to fire an employee” — one lawful, one unlawful — and held that if the lawful reason alone would have sufficed, the employee could not prevail. (Ibid.) “That is not the problem confronted here.” (Ibid.) Because the case came to the Court “on the express assumption that an unlawful motive was the sole basis for the firing,” and because McKennon’s misconduct “was not discovered until after she had been fired,” the employer “could not have been motivated by knowledge it did not have and it cannot now claim that the employee was fired for the nondiscriminatory reason.” (Id. at pp. 359–360.) Mixed-motive cases were inapposite except to underscore “the necessity of determining the employer’s motives in ordering the discharge,” for “‘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 p. 360, quoting Price Waterhouse v. Hopkins (1989) 490 U.S. 228, 252 (plur. opn.).)

The unclean-hands maxim yields to national policy, but does not render the misconduct wholly irrelevant. Turning from liability to remedy, the Court explained that equity’s traditional rule barring a suitor with unclean hands “has not been applied where Congress authorizes broad equitable relief to serve important national policies,” and the Court has rejected the defense “‘where a private suit serves important public purposes.’” (McKennon, supra, 513 U.S. at p. 360, quoting Perma Life Mufflers, Inc. v. International Parts Corp. (1968) 392 U.S. 134, 138.) “That does not mean, however, the employee’s own misconduct is irrelevant to all the remedies otherwise available under the statute.” (Id. at pp. 360–361.) In giving effect to the Act, courts “must recognize the duality between the legitimate interests of the employer and the important claims of the employee who invokes the national employment policy mandated by the Act.” (Id. at p. 361.) The ADEA, “like Title VII, is not a general regulation of the workplace but a law which prohibits discrimination,” and it does not constrain employers “from exercising significant other prerogatives and discretions in the course of the hiring, promoting, and discharging of their employees.” (Ibid.) The misconduct therefore becomes relevant “not to punish the employee, or out of concern ‘for the relative moral worth of the parties,’ but to take due account of the lawful prerogatives of the employer in the usual course of its business and the corresponding equities that it has arising from the employee’s wrongdoing.” (Ibid.)

The remedial calculus: no reinstatement or front pay, and back pay cut off at discovery. The Court declined to fix rigid boundaries, acknowledging that “the factual permutations and the equitable considerations they raise will vary from case to case.” (Id. at pp. 361–362.) It nonetheless announced a general rule: “neither reinstatement nor front pay is an appropriate remedy,” because reinstating someone the employer “would have terminated, and will terminate, in any event and upon lawful grounds” would be “both inequitable and pointless.” (Id. at p. 362.) Back pay presented “a more difficult problem.” (Ibid.) The object of compensation “is to restore the employee to the position he or she would have been in absent the discrimination,” but that principle is hard to apply with precision where after-acquired evidence would have led to a legitimate termination. (Ibid.) The Court held that once an employer learns of wrongdoing warranting a legitimate discharge, “we cannot require the employer to ignore the information, even if it is acquired during the course of discovery in a suit against the employer and even if the information might have gone undiscovered absent the suit.” (Ibid.) Hence the back-pay calculation runs “from the date of the unlawful discharge to the date the new information was discovered,” with the court free to consider “extraordinary equitable circumstances that affect the legitimate interests of either party.” (Ibid.) An absolute rule barring any back pay, by contrast, “would undermine the ADEA’s objective of forcing employers to consider and examine their motivations, and of penalizing them for employment decisions that spring from age discrimination.” (Ibid.)

The employer’s threshold burden, and a check on discovery abuse. Critically, the Court conditioned these remedial limitations on a showing by the employer. “Where an employer seeks to rely upon after-acquired evidence of wrongdoing, it must first 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 pp. 362–363.) The Court acknowledged “the concern that employers might as a routine matter undertake extensive discovery into an employee’s background or performance on the job to resist claims under the Act,” calling it “not an insubstantial one,” but concluded that the courts’ authority to award attorney’s fees under 29 U.S.C. §§ 216(b) and 626(b) and “to invoke the appropriate provisions of the Federal Rules of Civil Procedure will deter most abuses.” (Id. at p. 363.)

Significance

McKennon is the controlling Supreme Court authority on the after-acquired-evidence doctrine in employment-discrimination litigation. Its structural move — severing liability from remedy — supplies the template that lower courts apply across the federal antidiscrimination statutes and that California courts apply to FEHA. The decision rejects the categorical, liability-defeating rule that several circuits, led by the Tenth Circuit’s Summers decision, had erected on the foundation of Mt. Healthy. After McKennon, the employee’s later-discovered misconduct cannot erase the antecedent fact of discrimination; it can only shape what the plaintiff recovers.

The opinion’s remedial architecture is precise and has proven durable. Reinstatement and front pay are generally off the table; back pay ordinarily runs from the unlawful discharge to the date the employer discovered the wrongdoing; and the entire framework is unavailable unless the employer carries the burden of proving the misconduct was severe enough that it would in fact — not merely could have — terminated the employee on that ground alone. (McKennon, supra, 513 U.S. at pp. 362–363.) That “in fact would have” standard is the doctrine’s center of gravity: it forecloses the employer from converting a post-hoc justification into a defense and tracks the Court’s insistence, drawn from the mixed-motive cases, that proof a decision “would have been justified” is not proof it “would have been made.” (Id. at p. 360.) The reasoning is also notable for grounding the remedy in equitable principles — the duality of employer and employee interests and the unclean-hands tradition — rather than in the bright-line logic of the lower courts.

Key quotes

“An employee discharged in violation of the ADEA is not barred from all relief when, after her discharge, her employer discovers evidence of wrongdoing that, in any event, would have led to her termination on lawful and legitimate grounds had the employer known of it.” (McKennon, supra, 513 U.S. at p. 356.)

“It would be both inequitable and pointless to order the reinstatement of someone the employer would have terminated, and will terminate, in any event and upon lawful grounds.” (Id. at p. 362.)

“The beginning point in the trial court’s formulation of a remedy should be calculation of backpay from the date of the unlawful discharge to the date the new information was discovered.” (Id. at p. 362.)

“Where an employer seeks to rely upon after-acquired evidence of wrongdoing, it must first 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 pp. 362–363.)

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Practice pointer

Open questions

The Court expressly declined to fix the outer limits of the doctrine, leaving the “proper boundaries of remedial relief in the general class of cases” of this type “to be addressed by the judicial system in the ordinary course of further decisions, for the factual permutations and the equitable considerations they raise will vary from case to case.” (McKennon, supra, 513 U.S. at pp. 361–362.) The opinion thus invites, but does not resolve, line-drawing about how severe the misconduct must be and how its proof is to be evaluated.

A second reserved question concerns “extraordinary equitable circumstances that affect the legitimate interests of either party,” which a trial court “can consider taking into further account” when fashioning the back-pay award. (Id. at p. 362.) The Court identified the category — and gestured at one application, noting that an employer is not required to ignore wrongdoing “even if it is acquired during the course of discovery … and even if the information might have gone undiscovered absent the suit” (ibid.) — but did not define what circumstances qualify or how an employer’s bad faith in pursuing such discovery might bear on the equities. The Court flagged the related concern that employers might “as a routine matter undertake extensive discovery into an employee’s background or performance on the job to resist claims under the Act,” deeming it “not an insubstantial one,” yet addressed it only by predicting that fee awards and the civil rules “will deter most abuses” — leaving the contours of any remedy for such abuse to later cases. (Id. at p. 363.)