Walton v. Interstate Warehousing, Inc.
Filing
56
MEMORANDUM OPINION OF THE COURT. Signed by District Judge Eli J. Richardson on 4/2/2020. (DOCKET TEXT SUMMARY ONLY-ATTORNEYS MUST OPEN THE PDF AND READ THE ORDER.)(mg)
IN THE UNITED STATES DISTRICT COURT
FOR THE MIDDLE DISTRICT OF TENNESSEE
NASHVILLE DIVISION
WENDY WALTON d/b/a SPENCER
STAFFING, INC.,
Plaintiff,
v.
INTERSTATE WAREHOUSING, INC.,
Defendant.
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NO. 3:17-cv-1324
JUDGE RICHARDSON
MEMORANDUM OPINION
Pending before the Court is Defendant’s Motion for Summary Judgment (Doc. No. 40,
“Motion”). Plaintiff has filed a response (Doc. No. 47, “brief in opposition”), and Defendant has
filed a reply (Doc. No. 52). For the reasons stated herein, Defendant’s Motion for Summary
Judgment will be granted in part and denied in part.
BACKGROUND1
Plaintiff Wendy Walton (“Plaintiff”) is the founder and sole owner of Spencer Staffing, an
employment company2 that, at all times relevant herein, provided temporary employees to
Defendant Interstate Warehousing, Inc. (“Defendant” or “Interstate”). Spencer Staffing and
Unless otherwise noted, the facts in this background section are taken from the parties’ Responses
to the Statements of Undisputed Material Facts (Doc. Nos. 50 and 53).
1
2
Plaintiff is an individual who does business as a sole proprietorship. Therefore, even though
Plaintiff does business under a trade name (“Spencer Staffing, Inc.”), the Court will refer to
Plaintiff as “she,” rather than “it.” It likewise will, for the most part, refer to Plaintiff’s sole
proprietorship as “Plaintiff” rather than “Spencer Staffing” or “Spencer Staffing, Inc.” since
legally the sole proprietorship and its owner are one. The Court notes that the “Inc.” after “Spencer
Staffing” in the trade name is inappropriate inasmuch as the business was a sole proprietorship
rather than a corporation.
Interstate Warehousing, Inc. entered into a Staffing Agreement (“the Agreement”) on December
28, 2015. In pertinent part, the Agreement provides:
Interstate has the right to reject any individual referred by Staffing Firm3 and
Staffing Firm and/or the employee of Staffing Firm has the right to reject the
assignment to Interstate.
...
Staffing Firm warrants that all temporary employees assigned to Interstate from
time to time are the employees of Staffing Firm and not the employees of Interstate.
Staffing Firm shall hire and assume responsibility, as provided under the terms of
this Agreement, for certain personnel (“Staff”) to perform work for Interstate.
...
Staffing Firm as the employer of such staff as are assigned to and utilized by
Interstate will, with respect to such workers, be solely responsible for:
(a) Making all proper payroll deductions, including income tax and Social
Security tax deductions . . .
(b) Making all payments, including payments for income tax, Social
Security tax and unemployment and disability insurance . . .
(c) Providing workers’ compensation coverage . . .
...
Staffing Firm further represents and warrants that it shall offer a health plan to the
temporary employees, which health plan shall satisfy the requirements of both IRC
Section 4980H(a) and IRC Section 4980H(b).
(Doc. No. 40-1 at 8-10). The gist of the agreement was that Plaintiff would find and submit for
Defendant’s consideration candidates for temporary, and perhaps eventual permanent, placement
as forklift operators for Defendant; if Defendant accepted and took on a particular candidate for
placement, the candidate would become Plaintiff’s employee for payroll and certain administrative
purposes, and in return for handling these payroll and administrative functions, Plaintiff would be
reimbursed the payroll costs (wages, employment taxes, etc.) and also paid a fee for placed
candidate.
3
The Agreement identifies Spencer Staffing as the “Staffing Firm.” (Doc. No. 40-1 at 1).
2
On April 14, 2016, Brian Blaylock, the Human Resources Director for Defendant’s
Murfreesboro facility, informed Plaintiff that Defendant planned to suspend its placement of
temporary employees. Defendant represented to Plaintiff that it had suspended placement because
it had no current need and was overstaffed and that it had accepted very few employees from any
temporary employment agency, not just Spencer Staffing, during this time.4 In November 2016,
Defendant made the decision not to continue to do business with Plaintiff.5 Defendant alleges that
its accounting staff had issues with Plaintiff’s payroll and invoices throughout Defendant’s entire
relationship with Plaintiff. (Doc. No. 50 at ¶ 47). Plaintiff asserts that both Plaintiff and Defendant
made errors with payroll and invoices during the parties’ business relationship. Plaintiff alleges
that Defendant ended their business relationship because Plaintiff complained about
discriminatory placement practices,6 namely, Defendant’s unwillingness to accept7 men over 40
years old or women (of any age). (Doc. No. 22, ¶¶ 14-17).8
4
Plaintiff denies these allegations (Doc. No. 50 at ¶¶ 22-23), but she fails to cite anything to
support those denials, as required by Local Rule 56.01(c)(3).
Although Defendants refer to this decision simply as “ending the relationship” with Plaintiff,
there is no evidence that the Agreement remained in effect, and the Court interprets the decision
as terminating the Agreement.
5
Defendant adamantly denies that Plaintiff ever questioned Defendant’s placement practices. See,
e.g., Doc. No. 50 at ¶ 74 and Doc. No. 53 at ¶¶ 16, 35, 37, 39-41, 44-47, 49-51, and 67-68.
6
The Court refers herein to Defendant “accepting” (or not “accepting”) candidates, rather to than
Defendant “hiring” (or not “hiring”) candidates. This is because, as specifically provided in the
Agreement, candidates accepted by Defendant to work for Defendant were “hired” by Plaintiff, as
the Agreement specifically calls it, as Plaintiff’s employees. For similar reasons, the Court refers
to Defendant’s “placement” practices rather than its “hiring” practices, and to candidates
“place[d]” or not “place[d] with Defendant rather than to candidates “hired by” Defendant.
7
8
Although Plaintiff contends in the Amended Complaint that Defendant refused to accept men
over the age of 40, she has not argued that part of her claim in response to Defendant’s Motion,
wherein she refers (obliquely) to such refusal only once (Doc. No. 47 at 21) and instead focuses
exclusively on Defendant’s alleged failure to accept women.
3
Plaintiff sued Defendant, pursuant to this Court’s diversity jurisdiction (28 U.S.C. § 1332),
for violations of the Tennessee Human Rights Act (“THRA”), intentional interference with
business relationships, and breach of contract. (Doc. No. 22).
SUMMARY JUDGMENT STANDARD
Summary judgment is appropriate where there is no genuine issue as to any material fact
and the movant is entitled to judgment as a matter of law. Fed. R. Civ. P. 56(c). “By its very terms,
this standard provides that the mere existence of some alleged factual dispute between the parties
will not defeat an otherwise properly supported motion for summary judgment; the requirement is
that there be no genuine issue of material fact.” Anderson v. Liberty Lobby, Inc., 477 U.S. 242,
247-48 (1986). In other words, even if genuine, a factual dispute that is irrelevant or unnecessary
under applicable law is of no value in defeating a motion for summary judgment. See id. at 248.
On the other hand, “summary judgment will not lie if the dispute about a material fact is
‘genuine[.]’” Id.
A fact is “material” within the meaning of Rule 56(c) “if its proof or disproof might affect
the outcome of the suit under the governing substantive law.” Anderson, 477 U.S. at 248. A
genuine dispute of material fact exists if the evidence is such that a reasonable jury could return a
verdict for the nonmoving party. Harris v. Klare, 902 F.3d 630, 634-35 (6th Cir. 2018).
The party bringing the summary judgment motion has the initial burden of identifying
portions of the record that demonstrate the absence of a genuine dispute over material facts.
Pittman v. Experian Information Solutions, Inc., 901 F.3d 619, 627-28 (6th Cir. 2018). If the
summary judgment movant meets that burden, then in response the non-moving party must set
forth specific facts showing that there is a genuine issue for trial. Id. at 628.
4
A party asserting that a fact cannot be or genuinely is disputed—i.e., a party seeking
summary judgment and a party opposing summary judgment, respectively—must support the
assertion by citing to materials in the record, including, but not limited to, depositions, documents,
affidavits or declarations. Fed. R. Civ. P. 56(c)(1)(A). On a motion for summary judgment, a party
may object that the supporting materials specified by its opponent “cannot be presented in a form
that would be admissible in evidence.” Fed. R. Civ. P. 56(c)(2). Upon such an objection, the
proponent of the supporting material must show that the material is admissible as presented or
explain how it could be presented in a form that would be admissible. Thomas v. Haslam, 303 F.
Supp. 3d 585, 624 (M.D. Tenn. 2018); Mangum v. Repp, 2017 WL 57792 at ** 5 (6th Cir. Jan. 5,
2017) (citing Fed. R. Civ. P. 56(c) advisory committee’s note to 2010 amendment).
The court should view the facts and draw all reasonable inferences in favor of the nonmoving party. Pittman, 901 F.3d at 628. Credibility judgments and weighing of evidence are
improper. Hostettler v. College of Wooster, 895 F.3d 844, 852 (6th Cir. 2018). As noted above,
where there is a genuine dispute as to any material fact, summary judgment is not appropriate. Id.
The court determines whether sufficient evidence has been presented to make the issue of fact a
proper jury question. Id. The mere existence of a scintilla of evidence in support of the nonmoving
party’s position will be insufficient to survive summary judgment; rather, there must be evidence
upon which the jury could reasonably find for the nonmoving party. Rodgers v. Banks, 344 F.3d
587, 595 (6th Cir. 2003).
TENNESSEE HUMAN RIGHTS ACT
The THRA prohibits discrimination by an employer based upon gender and age (Tenn.
Code Ann. § 4-21-401(a)) and prohibits retaliation against a person who opposes a practice
declared discriminatory by the THRA. Tenn. Code Ann. § 4-21-301(a). Plaintiff maintains that
5
Defendant violated these provisions by refusing to accept women and by retaliating against her for
opposing Defendant’s placement practices. She asserts that she has a cause of action under the
THRA based on such alleged retaliation
Defendant argues that the THRA prohibits discrimination and retaliation by employers, and
Defendant was not Plaintiff’s employer. Defendant contends that Plaintiff lacks standing to bring
a discrimination claim under the THRA because Plaintiff has alleged that Defendant discriminated
not against her but rather against female candidates for employment.
With regard to discrimination, the relevant statute states: “It is a discriminatory practice for
an employer” to discriminate based upon gender or age. Tenn. Code Ann. § 4-21-401(a) (emphasis
added). Defendant argues that Plaintiff, because she cannot bring this claim for herself, could only
possibly bring such a claim if it was based upon third-party standing. (Doc. No. 41 at 4).
However, Plaintiff does not appear to be claiming that Interstate discriminated against her
because of her gender or her age. (Doc. No. 47 at 10-14). Instead, she alleges discrimination only
against female candidates for employment (a category in which she is not included because she
was not a candidate for employment with Defendant). She asserts two theories for relief under the
THRA. The first (which seems best characterized as a “discrimination” theory) posits that she
herself suffered damages (in the form of lost fees) directly from Defendant’s discrimination against
the female candidates she submitted for placement with Defendant. The second is a retaliation
theory, positing that she herself suffered retaliation for opposing Defendant’s discrimination
against women candidates. In response to Defendant’s motion, she focuses on her retaliation theory
and argues that “Defendant’s third-party standing analysis is unnecessary.” (Id. at 14). Indeed,
because she has not argued in support of the discrimination theory in her response to the Motion,
it seems that Plaintiff well may have implicitly abandoned that theory.
6
The Court finds that Plaintiff’s THRA claim cannot survive under the discrimination
theory, not only because she has not asserted it in her response to the Motion, but alternatively
because she cannot show (and does not even claim) that Interstate was her employer. Plaintiff’s
relationship with Interstate was contractual. As evidenced by the undisputed facts above, Plaintiff
was not an employee of Interstate; Plaintiff was an independent contractor. The Sixth Circuit has
held that federal employment discrimination statutes protect employees but not independent
contractors. Miller v. Quisenberry, No. 1:19-cv-44, 2020 WL 375788, at * 3 (S.D. Ohio Jan. 23,
2020) (citing Shah v. Deaconess Hosp., 355 F.3d 496, 499 (6th Cir. 2004) (citing cases under
federal employment statutes)); see also Bynum v. Mack Mech., Inc., No. 2:16-0023. 2016 WL
6138607, at * 2 (M.D. Tenn. Oct. 21, 2016).9 This principle applies to federal employment
retaliation claims as well. Wheatley v. West Central Mich. Emp’t & Training Consortium, Inc.,
341 F. Supp. 3d 753, 768 (W.D. Mich. 2018) (employer not liable for retaliation under Title VII
because he was an independent contractor, not an employee); Farrell v. Finchum Sports Floors,
No.3:14-cv-565, 2018 WL 283247, at * 3 (E.D. Tenn. Jan. 3, 2018) (Title VII protects employees,
but not independent contractors, from retaliation).
As for Plaintiff’s retaliation theory, the relevant statute states: “It is a discriminatory
practice for a person . . . . to retaliate or discriminate in any manner against a person because such
person has opposed a practice declared discriminatory by this chapter.” Tenn. Code Ann. § 4-21301(a)(1). Again, Defendant argues that Plaintiff cannot rely upon this provision because she is
9
The Court also notes that Interstate was not the employer of the candidates selected from among
those Plaintiff sent to it for consideration. As clearly set forth in the Agreement, the selected
candidates were employees of Plaintiff, with Plaintiff being responsible for the usual employer
administrative tasks, such as paying taxes and providing health benefits. (Doc. No. 40-1). The
Amended Complaint states that Plaintiff contracted with Defendant “for the placement of Spencer
Staffing employees.” (Doc. No. 22 at ¶ 5) (emphasis added).
7
not an employee, and Interstate is not her employer. Plaintiff argues there is no requirement that
she be an employee to bring a retaliation claim. She notes that “persons” are protected from
retaliation, then argues in essence that “persons” is a term broader than “employees” and one that
Tennessee courts have instructed should be construed broadly. (Doc. No. 47 at 13).
The parties dispute whether the Court may look to federal law in interpreting the retaliation
provision of the THRA. One of the stated purposes of the THRA, however, is to provide for
execution within Tennessee of the policies embodied in Title VII and other federal civil rights
laws. Tenn. Code Ann. § 4-21-101(a)(1). Generally, courts interpret the THRA similarly, if not
identically, to Title VII, although they are not obligated to follow or be limited by federal law in
interpreting the THRA. Ferguson v. Middle Tenn. State Univ., 451 S.W.3d 375, 380-81 (Tenn.
2014); Gregory v. Lowe’s Home Ctrs., LLC, No. 3:15-cv-00988, 2017 WL 2181552, at * 4 (M.D.
Tenn. May 18, 2017). Given the similarity of the two statutes (THRA and Title VII), when
applying the THRA, courts borrow the Title VII framework developed by federal courts. Allen v.
Cumberland Med. Ctr., Inc., No. 2:10-cv-0045, 2010 WL 3825667, at * 3 (M.D. Tenn. Sept. 24,
2010).
Notwithstanding Title VII’s statutory language that refers to “individuals,” courts have
limited Title VII’s protections to individuals who are employees. Allen, 2010 WL 3825667, at * 4
(citing Birch v. Cuyahoga Cty. Probate Court, 392 F.3d 151, 157 (6th Cir. 2004)). Although the
THRA does not use the term “employees,” its provisions do speak of “employers,” and the
Tennessee Supreme Court has looked to Title VII’s definition of “employee” to define the reach
of the THRA. Id. (citing Bredesen v. Tenn. Judicial Selection Comm’n, 214 S.W.3d 419, 430, 432
(Tenn. 2007)).Thus, claims under the THRA require an employer-employee relationship. Adair v.
Hunter, 236 F. Supp. 3d 1034, 1047 (E.D. Tenn. 2017) (Tennessee Supreme Court requires that
8
there be an employer-employee relationship in order for the THRA to provide the relief plaintiffs
seek).
Plaintiff contends that because the THRA is “broader” than Title VII, liability should
extend to any individual for retaliation against any individual because of her opposing practices
made unlawful by the THRA, citing (among other things) Carr v. UPS, 955 S.W.2d 832 (Tenn.
1997). (Doc. No. 47 at 12 n. 4). Carr does hold, as Plaintiff notes, that “the THRA is broader than
Title VII in terms of who may be held liable for harassment and discrimination.” Id. at 835. But
that is not the end of the story, or even the probative part of the story.
In Carr, the court found that the THRA is broader than Title VII because it (1) applies to
entities employing fewer employees than required by Title VII, and (2) extends liability to persons
who “[a]id, abet, incite, compel or command a person to engage in any of the acts or practices
declared discriminatory by this chapter.”10 Id. at 835-36. But in so holding, Carr was addressing
only who was liable, not who was protected. Carr does not say that non-employees are protected
under the THRA’s retaliation provision, and Plaintiff does not cite a single case holding otherwise;
notably, the cases she cites addressing the term “person” in the THRA’s retaliation provision deal
with who is liable rather than who is protected, and one (Bredesen, 214 S.W.3d at 430) did not
deal with the retaliation provision at all.
Carr also states that “[a]lthough the language of Title VII and the THRA differ slightly, it
is clear that the legislature intended the THRA to be coextensive with federal law.” Id. at 834. See
also Lynch v. City of Jellico, 205 S.W.3d 384, 399 (Tenn. 2006) (stating that because “[t]he intent
10
Carr was overruled on other grounds by Parker v. Warren Cty Utility District, 2 S.W.3d 170
(Tenn. 1999). In Parker, the court actually modified Carr to bring it in line with more recent
federal (Title VII) law on supervisor sexual harassment. Id. at 176.
9
of the THRA is to provide for execution within Tennessee of the policies embodied in the federal
civil rights statutes ... an analysis of claims under the THRA is the same as under Title VII of the
Federal Civil Rights Act”). Thus, in part Carr rejected the plaintiff’s expansive view of
“employer” liability under the THRA—i.e., that employees of an employer could be individually
liable—because it “agree[d] with the federal courts' analyses” rejecting that view and because “the
slight deviation of THRA's definition of employer from Title VII's definition does not warrant an
interpretation that would be inconsistent with Title VII.” Carr, 955 S.W.3d at 835. Concededly,
as noted, Carr did recognize the THRA’s broader view of employer liability in certain other
contexts. But this was based on discrete provisions of the THRA wholly absent from Title VII. Id.
at 835-36. The upshot seems to be that when the THRA has separate provisions that go beyond
Title VII’s provisions in terms of employer liability, they will be given effect by Tennessee courts
despite their divergence from Title VII. But Tennessee courts will not rely on “slight variations”
in the two parallel statutes’ language to justify expanded employer liability under the THRA.
The same logically should pertain to the issue of expanded protection under the THRA:
“slight variations” in the statutory language do not justify expansion of protection under the THRA
beyond the protection provided by Title VII. Here, the difference is between protection against
retaliation for “persons” (per the THRA) and protection against retaliation “for employees or
applicants for employment” (per Title VII, 42 U.S.C.A. § 2000e-3(a)). There is a variation here,
as the term “person” is broader than “employee” as a general matter, and Plaintiff says that this is
dispositive. But she cites no case law recognizing this variation as significant, let alone dispositive
on the current issue. And given that the Tennessee legislature intended the THRA to be coextensive with Title VII, there is no reason to believe that when the legislature used the term
“person” in its retaliation provision, without any indication that it be construed in any particular
10
way, it meant for the term to provide protection for “persons” beyond those persons protected by
Title VII—i.e., employees and applicants for employment. The term “persons,” after all, does not
necessarily mean “any and all persons, no matter who they are and whether the statute intends to
protect them from retaliation” rather than “persons intended to be protected from retaliation”—
meaning employees and applicants for employment, under Title VII principles generally embraced
by Tennessee courts.
Ferguson v. Middle Tennessee State Univ., 451 S.W.3d 375, 382 (Tenn. 2014) is not
dispositive on this issue, but it tends to support the equation of “person” with employee. Virtually
the Court’s entire discussion was framed in terms of the THRA, in purpose and in function,
protecting “employee[s]” from retaliatory acts of their employers. True, Ferguson did not
expressly preclude the possibility of protection for persons who oppose the retaliation of someone
else’s employer, and it included two quotations that tend to support the notion of protection for
non-employees.11 But those quotes are directly proceeded by a concern framed in terms of
employees: “If employees do not receive protection from retaliatory conduct after they complain
about discrimination, they will be less likely to report discriminatory conduct.” Id. at 381. The
overall impression is that Ferguson was assuming—albeit not deciding—that the THRA’s
protections against retaliation were for employees only. Ferguson thus supports Defendant’s
position to some extent.
“‘To a large extent, the effectiveness and very legitimacy of discrimination law turns on people's
ability to raise concerns about discrimination without fear of retaliation.’ Deborah L. Brake,
Retaliation, 90 Minn. L. Rev. 18, 20 (2005). Without protection from retaliation, ‘challenging
employment discrimination would be nearly impossible.’ Henry L. Chambers, Jr., The Supreme
Court Chipping Away at Title VII: Strengthening It or Killing It? 74 La. L. Rev. 1161, 1180
(2014).” Ferguson, 451 S.W.3d at 381.
11
11
Plaintiff’s contrary position is not frivolous.12 But for the reasons set forth above, the Court
finds that Plaintiff, who was never an employee (or applicant for employment) of Defendant,
cannot sustain a THRA claim against Defendant under a retaliation theory. As with Title VII, the
anti-retaliation provision of the THRA is designed to prohibit employer actions that are likely to
deter employees from filing complaints with the EEOC or otherwise asserting their rights under
anti-discrimination statutes. Ferguson, 451 S.W.3d at 381;Clough v. State Farm Mut. Auto Ins.
Co., No. 13-2885, 2014 WL 1330309, at * 2 (W.D. Tenn. Mar. 28, 2014) (THRA applies only to
“employers” and thus protects only “employees.”).
Having found that Plaintiff is not entitled to bring THRA claims under these circumstances,
the Court need not reach the parties’ other arguments as to those claims.13 For all these reasons,
Defendant has shown that it is entitled to judgment as a matter of law on Plaintiff’s THRA claim,
and summary judgment for Defendant will be entered on that claim.
INTENTIONAL INTERFERENCE WITH BUSINESS RELATIONSHIPS
Count Two of the Amended Complaint asserts a claim for intentional interference with
business relationships, whereby Plaintiff must demonstrate: (1) an existing business relationship
12
Plaintiff invokes the Americans with Disabilities Act (ADA) and the Rehabilitation Act, noting
that federal appellate courts have construed their retaliation provisions to protect a broad category
of persons and not just persons protected from discrimination under those statutes; she claims that
the THRA’s retaliation provision should be construed likewise. (Doc. No. 47 at 12-13 & n.5). The
Court disagrees, because it is clear that the THRA is to be construed in harmony with Title VII
and not the ADA or Rehabilitation Act.
13
The Court notes, however, that Plaintiff likely could not establish one of the elements of a
retaliation claim under the THRA, due to the absence of an “adverse employment action.” An
adverse employment action requires a materially adverse change in the terms and conditions of
employment. Norman v. Rolling Hills Hosp., LLC, 820 F. Supp. 2d 814, 822-23 (M.D. Tenn. 2011).
Moreover, Plaintiff’s argument that she has direct evidence of retaliation misses the mark. The
alleged “direct evidence” she claims is alleged evidence of discrimination, not retaliation.
12
with specific third parties or a prospective relationship with an identifiable class of third persons;
(2) Defendant’s knowledge of that relationship and not a mere awareness of Plaintiff’s business
dealings with others in general; (3) Defendant’s intent to cause the breach or termination of the
business relationship; (4) Defendant’s improper motive or improper means; and (5) damages
resulting from the tortious interference. Trau-Med of Am., Inc. v. Allstate Ins. Co., 71 S.W.3d 691,
701 (Tenn. 2002), cited in Best Choice Roofing & Home Improvement, Inc. v. Best Choice Roofing
Savannah, LLC, No. 3:18-cv-00615, 2020 WL 1139873, at * 15 (M.D. Tenn. Mar. 9, 2020).
Significantly, the claim can be based either on an existing business relationship or a prospective
business relationship. To evaluate this claim, the Court must first delineate the specific business
relationships allegedly interfered with—an undertaking to which the parties devote too little
attention.
The Amended Complaint (Doc. No. 22) alleges that Plaintiff had business relationships
with workers “to be placed at Interstate Warehousing.” ¶ 42. It appears that these workers were
not employees of Plaintiff (or of Defendant), but rather applicants for employment by Plaintiff for
a position at Interstate. As explained by Plaintiff (apparently without material dispute from
Defendant):
The process for hiring was straightforward: Ms. Walton would go to
American Job Centers and interview applicants for stand-up forklift operator
positions at Interstate. Id., ¶ 10. Ms. Walton would submit the applications of
candidates to Interstate’s human resources manager, Brian Blaylock, or Maddie
Morris, a human resources generalist, usually by e-mail. Id., ¶ 11. Mr. Blaylock or
Ms. Morris would then reply, usually by e-mail, telling Ms. Walton which
candidates Interstate would like to interview and which ones it did not. Id., ¶ 12.
Ms. Walton would then contact the applicants to set up the interviews. Id., ¶ 13. If
they were hired by Interstate, the employees would remain on Ms. Walton’s payroll
for 90 days, and Interstate would pay Spencer Staffing for those employees’
services. Id., ¶ 14. Ms. Walton would then pay her employees. Id. After
approximately 90 days, if the employee had performed well, he would be officially
hired by Interstate and move from Spencer Staffing’s payroll to Interstate’s. Id., ¶
15.
13
(Doc. No. 47 at 3). Notably, all applicants to which this count pertains—i.e., the applicants whose
business relationships with Plaintiff were allegedly interfered with by Defendant—never became
employees of Plaintiff, because they were the ones Defendant (allegedly wrongfully) refused to
have placed with Defendant. Thus, their relationships with Plaintiff were that they were mere
applicants for employment—a fact borne out by the record, which includes several “Application[s]
for Employment” of applicants allegedly rejected for discriminatory reasons. (Doc. No. 48-1,
passim). There is no evidence whatsoever that Defendant intended to, or did, hinder those
relationships as required by the third element of this cause of action; the record is quite clear that
these applicants completed their applications to Plaintiff’s satisfaction, and they were then
submitted to Defendant for consideration. This claim thus fails as to the existing business
relationships claimed by Plaintiff.
Perhaps sensing this, Plaintiff focuses in her brief in opposition on how Defendant, via its
alleged discriminatory consideration and rejection of female applicants, interfered with Plaintiff’s
“prospective contractual relations,” i.e., interfered with her prospect of obtaining employees.
Plaintiff contends that Interstate interfered with those prospective contractual relations (i.e., a
prospective employer-employee relationship with applicants subjected to Defendant’s
discriminatory practices) by refusing to accept (or even interview) female candidates, who if
accepted by Defendant would have become Plaintiff’s employees. (Doc. No. 47 at 20). She claims
that Interstate’s refusal to accept these candidates was based on sex, which is an improper
discriminatory motive. (Id.) Defendant argues in response that Plaintiff cannot show that it
intended to interfere in her business relationships or had a motive to injure Plaintiff.
Defendant contends that Plaintiff has basically pled herself out of a claim for tortious
interference with business relationship by asserting that Defendant’s intent was to not accept (or
14
even interview) certain people (women). This is something different from an intent to interfere
with prospective employment relationships between Plaintiff and the relevant applicants. A
company intent on refusing (rightly or wrongly) to consider certain of a staffing company’s
applicants might give no thought whatsoever to the applicant’s relationship with the staffing
company; indeed, if this policy of refusal is especially important to the company (which is
precisely what Plaintiff alleges here), it likely would not be concerned one way or the other with
that third-party relationship. Defendant has correctly pointed out Plaintiff’s core assertion, thus
shifting the burden to Plaintiff to at least raise a genuine issue as to Defendant’s intent to interfere
with that prospective employment relationship. But Plaintiff brushes past this argument, merely
stating that Interstate did not interview or accept any women that she sent them, causing the breach
of Plaintiff’s relationships with those women. (Doc. No. 47 at 20). She does not address, at this
point, the intent of Interstate in making its decisions; she certainly does not point to any evidence
suggesting that Defendant may have had an intent to interfere with the Plaintiff-applicant
relationship. Plaintiff has not raised a genuine issue of material fact that Interstate’s intent was to
interfere with her prospective employment relationships with certain candidates.
Defendant has carried its initial burden of demonstrating no genuine issue of material fact
and that it is entitled to judgment as a matter of law as to Plaintiff’s intentional interference with
business relationships claim, and Plaintiff has failed to come forward with evidence to rebut that
showing. Therefore, summary judgment for Defendant will be entered on Plaintiff’s claim for
intentional interference with business relationships.
15
BREACH OF CONTRACT14
Plaintiff’s Amended Complaint alleges that by failing to accept qualified female workers15
and by retaliating against Plaintiff, Defendant “intentionally, fraudulently, maliciously, or
recklessly breached the parties’ contract.” (Doc. No. 22 at ¶ 49). But as Defendant noted in its
brief in support of its Motion, the Amended Complaint does not identify any provision of the
Agreement that was allegedly breached, and certainly no such provision is readily apparent. In her
brief in opposition, Plaintiff again failed to identify any such provision. Instead, Plaintiff made a
trio of arguments, two relating to a breach premised on discriminating against candidates in
protected groups, and another related to a breach premised upon Defendant terminating the
Agreement in retaliation for her opposing such discrimination.
In her first argument, Plaintiff claims that the parties’ Agreement is valid, but that if it was
construed as not prohibiting illegal discrimination, it would be an illegal contract and thus
unenforceable. (Doc. No. 47 at 22-23). She posits, “In other words, Plaintiff and Defendant could
not have contracted for Defendant to reject Plaintiff’s employees due to gender discrimination;
that would be an illegal and void contract.” (Id. at 23). But the question is not whether Defendant
contracted for Defendant to reject Plaintiff’s employees due to gender discrimination; neither side
claims (and no evidence suggests) that Defendant did this.16 The Court need not and will not decide
14
In Tennessee, a viable claim for breach of contract has three essential elements: (1) the existence
of an enforceable contract; (2) non-performance amounting to a breach of that contract; and (3)
damages caused by the breach of contract. F.S. Sperry Co, 304 F. Supp. 3d at 701.
15
As indicated above, the Amended Complaint also alleges that Defendant refused to accept male
workers older than 40, although Plaintiff no longer actively bases her claim upon this allegation.
16
Defendant does assert that it did not contractually bind itself not to discriminate, but that is not
the same as asserting that it contractually obtained for itself an affirmative prerogative to
discriminate.
16
this issue based on what did not happen. Instead the Court asks whether the Agreement was
breached based on what did happen.
Plaintiff’s second argument is based on the duty of good faith and fair dealing implied in
every contract. The argument is, in essence, deployed against a formidable argument by Defendant
refuting that it breached the Agreement by discriminating against certain applicants for
employment. Defendant of course denies engaging in such discrimination. But even if it had so
discriminated, it argues, nothing in the Agreement required it to accept certain workers. After all,
the Agreement specifically states that Interstate has the right to reject any applicant referred by
Plaintiff.17 The terms of the Agreement do not require Interstate to accept workers, male or female,
even if they are qualified. Defendant has a point; it is hard to see how Defendant could have
violated the terms of the Agreement as written.
But that is where the duty of good faith and fair dealing comes in. It is well established
that, in Tennessee,18 the common law imposes a duty of good faith in the performance of contracts.
Dick Broad. Co., Inc. of Tenn. v. Oak Ridge FM, Inc., 395 S.W.3d 653, 660 (Tenn. 2013). It is also
well established that the laws affecting enforcement of a contract, and existing at the time and
17
Plaintiff (and her applicants) also had the right to reject any potential placement with Interstate.
(Doc. No. 40-1).
18
Plaintiff asserts that Tennessee law applies here despite the existence of an Indiana choice-oflaw provision in the parties’ Agreement. (Doc. No. 47 at 21-22 n.6). The Court agrees but also
notes that some (though not all) of the arguments made with respect to this count are so basic that
the identity of the particular applicable law almost certainly would make no difference.
17
place of its execution, enter into and form a part of the contract.19 Id. at 668; In re: Rader Bonding
Co., Inc., 592 S.W.3d 852, 860 (Tenn. 2019).
The “breach of the duty of good faith and fair dealing ‘is not a cause of action in and of
itself but is a part of a breach of contract cause of action.’” Z.J. v. Vanderbilt Univ., 355 F. Supp.
3d 646, 699 (M.D. Tenn. 2018) (quoting Doe v. Univ. of the South, No. 4:09-cv-62, 2011 WL
1258104, at *18 (E.D. Tenn. Mar. 31, 2011). It may be more apt to say that the duty of good faith
and fair dealing is a part of every contract. The implied covenant of good faith and fair dealing
creates a duty to provide basic fairness. Id.20 While the implied covenant does not create new
contractual rights or obligations, it protects the parties’ reasonable expectations as well as their
rights to receive the benefits of their agreement. Dick Broad., 395 S.W.3d at 666. Thus, “there is
an implied covenant of good faith and fair dealing in every contract, whereby neither party shall
do anything which will have the effect of destroying or injuring the right of the other party to
receive the fruits of the contract.” Id. at 662 (quoting 17A Am.Jur.2d Contracts § 370 (2004)). The
general idea, at least in pertinent part, seems to be that one party cannot in bad faith get in the way
of the counterparty’s satisfaction of a contract condition that would result in the counterparty’s
realization of a benefit under the contract. In the Court’s view, the following hypothetical
demonstrates the principle. If a landowner agrees to pay a painter a $10,000 commission if she
completes a “satisfactory” landscape of the landowner’s estate, the landowner breaches the
covenant of good faith and fair dealing—and thus the contract—if he stops allowing the painter
19
When this Agreement was signed, the law was clear both that every contract included an implied
covenant of good faith and fair dealing and that an employer could not discriminate, based upon
gender, in hiring employees.
20
In some cases, the courts have expressed this principle as allowing the qualifying word
“reasonable” and its equivalent “reasonably” to be read into every contract. Dick Broad., 395
S.W.3d at 661.
18
onto his estate after the painter has completed most of the painting; the covenant protects the
painter from the argument that she, not having “completed” a “satisfactory” landscape, is
contractually not entitled to a commission.
As early as 1922, the Tennessee Supreme Court imposed an implied condition of
reasonableness in a contract requiring the sellers of land to find “satisfactory” the price of land
sold at auction in order for the auctioneer to be paid a commission. Robeson & Weaver v. Ramsey,
146 Tenn. 25, 245 S.W. 413, 413 (Tenn. 1922), cited in Dick Broad., 395 S.W.3d at 660. Where
the contract was silent as to “the standard of conduct anticipated by the parties in the performance
agreement; i.e., the sellers providing consent to the sale price as ‘satisfactory,’ the Court rejected
a standard allowing the sellers to act capriciously and required them to act in a commercially
reasonable manner.” Dick Broad., 395 S.W.3d at 660 (citing Robeson & Weaver, 245 S.W. at 415);
see also German v. Ford, 300 S.W.3d 692, 705, n.9 (Tenn. Ct. App. 2009) (when a contract is
contingent on one party’s satisfaction, that party must exercise his own judgment in good faith and
as a reasonable person).
The Court finds this principle to be applicable in this case. The Agreement plainly
contemplated Plaintiff submitting to Defendant qualified and competent candidates for placement
with Defendant. In its very first line, the Agreement unsurprisingly also contemplated (without
promising) that Defendant would accept some of these candidates for placement, and it required
Defendant to pay Plaintiff fees for accepted candidates. Although the terms of the Agreement
provided that Interstate had the right to reject any candidate referred by Plaintiff, the implied
covenant of good faith and fair duty, for the reasons set forth in the above-cited cases, required
Interstate to exercise its judgment in good faith and reasonably. In other words, Defendant’s
contractual prerogative to refuse an applicant was qualified by a duty to exercise that prerogative
19
in good faith. If, as Plaintiff alleges, Interstate exercised its judgment in a discriminatory way, then
a jury could find that Interstate breached the Agreement as qualified by the implied covenant—by
frustrating, in bad faith by discriminating against women, Plaintiff’s contemplated contractual
benefit (fees for submitted and placed candidates) to be obtained from its efforts in performing
under the contract by submitting competent and qualified female candidates. The jury could find
a breach, in other words, in Defendant avoiding payment of fees with respect to female applicants
that would have been payable (if so found by a jury)21 had Defendant not in bad faith prevented
such fees from ever becoming payable under the letter of the Agreement. Viewed slightly
differently, if Defendant exercised its discretion (to refuse candidates) in a discriminatory way,
then a jury could find that Defendant breached a promise in the Agreement (as qualified by the
implied covenant) not to reject candidates on unreasonable grounds.
In Town & Country Equip., Inc. v. Deere & Co., 133 F. Supp. 2d 665 (W.D. Tenn. 2000),
the court imposed a reasonableness requirement upon contractual provisions requiring consent to
an assignment, where the agreement did not provide for the standard of conduct for withholding
consent. Id. at 670, cited in Dick Broad., 395 S.W.3d at 662. That court concluded that the
defendant did not have to right to unreasonably limit or interfere with the sale. Id. The case
demonstrates the applicable principle here: seemingly unconstrained discretion to refuse or give
consent is qualified by the covenant of good faith and fair dealing.
21
The Court notes that Plaintiff, to prevail at trial, would need to satisfy all elements of a breach
of contract claim, including damages resulting from the alleged breach. To prove damages, she
well may have to prove that specific rejected female candidates would have been hired (and thus
generated fees for Plaintiff) but for Defendant’s alleged breach. However, the Court does not
intend to, and does not, say anything definitive about this at this juncture because the issue is not
presently before it.
20
Again, if Interstate discriminatorily refused to consider women for positions within its
company, a jury could reasonably find that that conduct was not taken in good faith and was a
violation of the implied covenant of good faith and fair dealing, resulting in a breach of the
Agreement. And Plaintiff has offered evidence of the alleged gender discrimination; she offers
evidence suggesting that Defendant did not accept female candidates and has testified that
Defendant’s Human Resources staff told her Defendant did not accept women for these forklift
operator positions. Defendant denies these factual allegations. But Plaintiff has demonstrated
genuine issues of material fact as to whether Defendant actually discriminated against women and,
thereby, breached the Agreement as qualified by the implied covenant.
As indicated above, Plaintiff makes a third argument, one related to Defendant’s alleged
breach of the Agreement via its termination of the Agreement. Plaintiff asserts, as being analogous
here, the principle that an employment contract cannot be terminated for illegal cause. She asserts
that Defendant breached the Agreement by terminating it for an illegal purpose, retaliation for her
opposition to Defendant’s gender discrimination. However, the Agreement says nothing about the
right to terminate—indeed, it does not include any provision for how, or under what circumstances,
a party may terminate the Agreement. In other words, there is no applicable term (or terms) of the
contract concerning termination for the implied covenant to qualify and thereby create a cause of
action where the language of the contract seemingly would not support one. And the termination
of the Agreement does not raise the kinds of concerns implicated by the implied covenant of good
faith and fair dealing, which is that a party continuing to perform under a non-terminated
agreement is essentially cheated out of the contractual benefits it is supposed to obtain by
performing.
21
The implied covenant serves to prevent a party from suffering a bad faith denial of the
benefit of its bargain, or the fruits of its performance, under the contract. Those purposes are
inapplicable in the case of Defendant’s termination of the Agreement. The termination effectively
meant that Defendant stopped considering Plaintiff’s candidates for future placement. And
Plaintiff did not bargain for anything other than unilateral cessation and some point, and the whole
idea of the cessation was for Plaintiff to stop any further performance under the Agreement before
Plaintiff could even undertake efforts for which she might earn compensation.
In other words, if a party terminates a contract like the Agreement,22 even if “unfairly,” the
result is that the counterparty ceases to put effort into performing under the contract. The result is
not that the counterparty is cheated out of the payoff it should receive from its efforts, which is the
primary concern of the implied covenant. Here, the termination of the Agreement resulted in
Plaintiff ceasing her efforts to place candidates with Defendant, rather than in her being deprived
of her just reward for either past placement efforts or future placement efforts (which, because of
the termination, will not in fact occur).
The Court finds that Defendant is entitled to summary judgment on Plaintiff’s claim that
Interstate breached the Agreement by terminating the Agreement allegedly in retaliation for her
alleged “protected activity,” but not on Plaintiff’s claim that Interstate breached the Agreement by
refusing to accept female applicants.
22
By this, the Court means a contract that (i) is of indefinite duration, (ii) is intended to last only
as long as both parties wish to continue the business relationship established by the contract, and
(iii) calls for one party to be compensated by the other party based only on intermittent and discrete
acts of performance (in this case, Plaintiff’s recruiting and placement of individual candidates)
undertaken by the first party at its option.
22
CONCLUSION
For the reasons explained herein, Defendant’s Motion for Summary Judgment (Doc. No.
40) will be granted in part and denied in part. Plaintiff’s claims based upon the THRA, her claims
for intentional interference with business relationships, and her claim for breach of contract as it
relates to termination of the Agreement will be dismissed. The sole remaining claim is Plaintiff’s
claim for breach of contract (as qualified by the implied covenant of good faith and fair dealing)
for Defendant’s refusal to accept female applicants.
An appropriate Order will be entered.
__________________________________
ELI RICHARDSON
UNITED STATES DISTRICT JUDGE
23
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