Flynn v. Distinctive Home Care, Inc. et al

Filing 32

OPININON AND ORDER GRANTING 22 Motion to Dismiss ; GRANTING 23 Motion for Summary Judgment. Signed by Judge Robert Pitman. (rf)

IN THE UNITED STATES DISTRICT COURT
FOR THE WESTERN DISTRICT OF TEXAS
SAN ANTONIO DIVISION

ROCHELLE FLYNN,
Plaintiff,
v.
DISTINCTIVE HOME CARE, INC. d/b/a
DISTINCTIVE HEATHCARE STAFFING,
INC.; AND SPECTRUM HEATHCARE
RESOURCES, INC.
Defendants.

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5:13-CV-0936-RP

OPINION AND ORDER
Before the Court are dispositive motions from both Defendants in the above-styled case.
Specifically, the Court now considers Defendant Spectrum Healthcare Resources, Inc.’s Motion
to Dismiss Pursuant to Fed. R. Civ. P. 12(b)(6), and in the Alternative, Motion for Summary
Judgment filed October 31, 2014 (Dkt. #22); Plaintiff Rochelle Flynn’s Response to Spectrum’s
Motion filed November 19, 2014 (Dkt. #27); Spectrum’s Reply filed November 26, 2014 (Dkt.
#29); Defendant Distinctive Home Care, Inc.’s Motion for Summary Judgment filed October 31,
2014 (Dkt. #23); Plaintiff’s Response to Distinctive’s Motion filed November 19, 2014 (Dkt. #26);
and Distinctive’s Reply filed December 3, 2014 (Dkt. #30).

After reviewing the pleadings,

relevant case law, and the entire case file, the Court issues the following Opinion and Order.
I.

BACKGROUND

This case is brought by Plaintiff Rochelle Flynn for employment discrimination under the
Rehabilitation Act and for state law breach of contract against Defendants Distinctive Home
Care, Inc. (“Distinctive”) and Spectrum Healthcare Resources, Inc. (“Spectrum”). Dr. Flynn is a
pediatrician who was recently diagnosed with Autism Spectrum Disorder, Level 1 mild (“ASD”),
a condition once referred to as Asperger’s Syndrome. (Resp. to Distinctive, Ex. 4, at 3). Shortly
after disclosing her condition to Defendants, Dr. Flynn’s Independent Contractor Agreement was
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terminated. (Distinctive’s Mot. Summ. J., App’x 3, at 4-5; Resp. to Spectrum, Ex. 1, at 28). The
present lawsuit arises out of this termination.
In the summer of 2012, Dr. Flynn was hired by Spectrum as an independent contractor
pediatrician at Wilford Hall Medical Center located at Joint Base San Antonio Lackland Air Force
Base (“Lackland Facilities”). (Spectrum’s Mot. Summ. J., App’x, at 1-7). Dr. Flynn subsequently
assigned all of her rights under the contract to Skwids and Skwiggles Pediatrics, PLLC,
(“Skwids and Skwiggles”) a limited liability company managed by Dr. Flynn. (Spectrum’s Mot.
Summ. J. App’x, at 8). Several months later, Spectrum’s contract to provide pediatricians at the
Lackland Facilities came to an end, and the government awarded Distinctive a new contract to
provide pediatricians at the Lackland Facilities. (Distinctive’s Mot. Summ. J., App’x 3, Ex. A).
Distinctive then subcontracted the day-to-day personnel administration at the Lackland Facilities
to Spectrum.

(Distinctive’s Mot. Summ. J., App’x 3 ¶ 6).

On April 20, 2013, Skwids and

Skwiggles signed a new Independent Contractor Agreement with Distinctive for Dr. Flynn’s
services. (Distinctive’s Mot. Summ. J., App’x 3, Ex. B).
Dr. Flynn was first diagnosed with ASD on May 15, 2013. (Resp. to Distinctive, Ex. 4,
at 3).

The following day, Dr. Richard Takao, a medical director for Spectrum who helped

manage Distinctive’s contract pediatricians, called Dr. Flynn to inform her that there had been
some complaints about her job performance and interactions with patients and coworkers. (Am.
Compl., at 3). During the call, Dr. Flynn informed Dr. Takao of her diagnosis. Id. Dr. Flynn
claims that Dr. Takao responded by saying that this “completely changed” his “perspective,” and
that it was “no longer cut and dried” and that he would “have to discuss it further” with
Distinctive. Id. at 3-4.
On May 30, 2013, Distinctive received an email about Dr. Flynn from David Warner, the
person responsible for overseeing the government’s contract with Distinctive. (Distinctive’s Mot.
Summ. J., at 3). The email and its attachments discussed Dr. Flynn’s poor performance and
asked Distinctive to remove Dr. Flynn as a contract pediatrician at the Lackland Facilities. Id.
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That night, Dr. Takao informed Dr. Flynn that her contract with Distinctive “was to be
terminated.”

(Am. Compl., at 4).

Throughout the next month Dr. Flynn attempted to

communicate with Distinctive and Spectrum to show that through inexpensive reasonable
accommodations she could improve her efficiency and social interactions, and that with these
minor changes she would be fully able to fulfill her duties as a contract pediatrician. Id. at 5-6.
Distinctive, however, refused to reverse their initial decision, and on June 28, 2013, Dr. Flynn
was told that the government would not agree to any “modifications” and that her contract was
effectively terminated. Id. at 5.
In addition, Dr. Flynn contends that during her tenure as a contract pediatrician, she had
been “singled out by harassing and demeaning comments and actions made by clinic director
Dr. Jennifer Strangle.”

Id. at 6.

For example, at a lunchtime meeting Dr. Strangle curtly

dismissed one of Dr. Flynn’s suggestions about how to gather information on family medical
history. Id. at 6-7. Dr. Flynn contends that this type of harassment “created a very hostile work
place” for her. Id. at 6.
On January 9, 2014, Dr. Flynn sued Distinctive and Spectrum alleging various violations
of the Rehabilitation Act of 1973 and state law breach of contract claims. Defendants filed the
present motions for summary judgment on October 31, 2014.
II. STANDARD OF REVIEW
Summary judgment is appropriate under Rule 56 of the Federal Rules of Civil Procedure
only “if the movant shows there is no genuine dispute as to any material fact and that the
movant is entitled to judgment as a matter of law.” Fed. R. Civ. P. 56(a). A dispute is genuine
only if the evidence is such that a reasonable jury could return a verdict for the nonmoving party.
Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 254 (1986).
The party moving for summary judgment bears the initial burden of “informing the district
court of the basis for its motion, and identifying those portions of [the record] which it believes
demonstrate the absence of a genuine issue of material fact.” Celotex Corp. v. Catrett, 477
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U.S. 317, 323 (1986). The burden then shifts to the nonmoving party to establish the existence
of a genuine issue for trial. Matsushita Elec. Indus. Co., Ltd. v. Zenith Radio Corp., 475 U.S.
574, 587 (1986); Wise v. E.I. DuPont de Nemours & Co., 58 F.3d 193, 195 (5th Cir. 1995). The
parties may satisfy their respective burdens by tendering depositions, affidavits, and other
competent evidence. Estate of Smith v. United States, 391 F.3d 621, 625 (5th Cir. 2004).
The Court will view the summary judgment evidence in the light most favorable to the
non-movant. Griffin v. United Parcel Serv., Inc., 661 F.3d 216, 221 (5th Cir. 2011). The nonmovant must respond to the motion by setting forth particular facts indicating that there is a
genuine issue for trial. Miss. River Basin Alliance v. Westphal, 230 F.3d 170, 174 (5th Cir.
2000). “After the non-movant has been given the opportunity to raise a genuine factual issue, if
no reasonable juror could find for the non-movant, summary judgment will be granted.” Id.
III. ANALYSIS
Plaintiff brings claims under two legal theories: (1) that Defendants violated her rights
under the Rehabilitation Act of 1973 by terminating her contract after finding out that she had
been diagnosed with ASD, failing to provide continued employment with reasonable
accommodations, and creating a hostile work environment due to her disability; and (2) that
Defendants breached the Independent Contractor Agreement by terminating the Agreement and
by failing to send notice of the termination by certified mail or express delivery. (Am. Compl., at
5-6, 8). The Court addresses each of these claims in turn.
A.

Rehabilitation Act Claims
Dr. Flynn asserts that “Defendants Distinctive and Spectrum violated the Rehabilitation

Act of 1973 when they terminated her contract after they found out she had been diagnosed
with Asperger’s Syndrome.”

Id. at 8.

The Rehabilitation Act of 1973 “establishes a

comprehensive federal program aimed at improving the lot of the handicapped.” Consolidated
Rail Corp. v. Darrone, 465 U.S. 624, 626 (1984). Section 504 of the Rehabilitation Act, 29
U.S.C. § 794, provides a private right of action for individuals subjected to disability
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discrimination—including employment discrimination—by any program that receives monetary
assistance from the federal government. See Lollar v. Baker, 196 F.3d 603, 609 (5th Cir. 1999).
Specifically, the Rehabilitation Act provides that “[n]o otherwise qualified individual with a
disability . . . shall, solely by reason of her or his disability, . . . be subjected to discrimination
under any program or activity receiving Federal financial assistance.” 29 U.S.C. § 794(a).
Defendants argue that Dr. Flynn lacks standing to bring claims under the Rehabilitation
Act because she was an independent contractor, not an employee. (Distinctive’s Mot. Summ.
J., at 7-10; Spectrum’s Reply, at 1-3). Plaintiff, on the other hand, argues that unlike other
employment discrimination statutes, an employer-employee relationship is not a prerequisite for
coverage under the Rehabilitation Act. (Resp. to Distinctive, at 8).
The Fifth Circuit has yet to directly address this issue, and other federal circuit courts are
split. The disagreement turns on whether the Rehabilitation Act adopts all or only part of Title I
of the Americans with Disabilities Act (“ADA”). Section 504 of the Rehabilitation Act states that
“[t]he standards used to determine whether this section has been violated in a complaint
alleging employment discrimination under this section shall be the standards applied under title I
of the Americans with Disabilities Act . . . as such sections relate to employment.” 29 U.S.C.
§ 794(d). If the Rehabilitation Act adopts Title I of the ADA wholesale, then it would have the
same coverage limitations as the ADA—specifically, there would need to be an employeremployee relationship. If the Rehabilitation Act only selectively incorporates Title I, however,
then independent contractors would likely be covered.
Two Circuits—the Sixth and Eighth—have decided that the Rehabilitation Act adopts
Title I of the ADA in full. Wojewski v. Rapid City Reg’l Hosp., 450 F.3d 338 (8th Cir. 2006); Hiler
v. Brown, 177 F.3d 542 (6th Cir. 1999). In Wojewski, the Eighth Circuit specifically addressed
whether independent contractors are covered under the Rehabilitation Act. Wojewski, 450 F.3d
at 344.

In a brief discussion, the court noted “the similarity between Title I and the

Rehabilitation Act,” and “absent authority to the contrary,” chose to “construe both to apply to an
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employee-employer relationship” and “decline [the] appellant’s invitation to extend coverage of
the Rehabilitation Act to independent contractors.” Id. at 345. 1 The Sixth Circuit has also
concluded, albeit indirectly, that the limitations found in Title I of the ADA apply to the
Rehabilitation Act. Hiler, 177 F.3d at 547. At issue in Hiler was whether the Rehabilitation Act
created a private cause of action for retaliation against an employee’s supervisors in their
individual capacities. Id. at 543. Deciding in the negative, the court determined that “[t]he ADA,
ADEA, and Rehabilitation Act borrowed the definition of ‘employer’ from Title VII”, and thus
“individuals who do not meet the [Title VII] statutory definition of ‘employer’ cannot be held liable
under the Rehabilitation Act.” Id. at 545 n.5, 547.
Conversely, the Ninth and Tenth Circuits have concluded that Title I of the ADA is only
selectively incorporated into the Rehabilitation Act. Fleming v. Yuma Reg’l Med. Ctr., 587 F.3d
938 (9th Cir. 2009); Schrader v. Ray, 296 F.3d 968 (10th Cir. 2002). In Schrader, the Tenth
Circuit considered whether the Rehabilitation Act incorporated the ADA’s definition of employer
requiring “fifteen or more employees” as a limitation on the entities covered by the Rehabilitation
Act. Schrader, 296 F.3d at 971. The Schrader court relied on the analysis in Johnson v. N.Y.
Hosp., 897 F. Supp. 83, 86 (S.D.N.Y. 1995):
In enacting the 1992 amendment of the Rehabilitation Act,
Congress intended that the standard of “reasonable
accommodations” that employers must make under the ADA
would serve as the standard in actions alleging Rehabilitation Act
violations in the employer-employee context. . . . The language of
the amendment states that the ADA's standards are to be used
only “to determine whether [the Rehabilitation Act] has been
violated.” 29 U.S.C. § 749(d). . . . What the amendment does not
state is that the standards of the ADA are to be used to determine

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The Ninth Circuit criticized this analysis because it found that Title I of the ADA and § 504 of the
Rehabilitation Act are “quite different.” Fleming v. Yuma Regional Medical Center, 587 F.3d 938, 945 (9th
Cir. 2009). Most importantly, “[s]ection 504 does not even mention employment, while Title I deals
exclusively with employment.” Id. Therefore, the Ninth Circuit concluded that “there is no need to
‘extend’ the Rehabilitation Act; its language is broad enough to cover employees and independent
contractors alike.” Id. (quoting Wojewski, 450 F.3d at 345).

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whether an employer is even subject to the Rehabilitation Act in
the first instance.
Schrader, 296 F.3d at 972 (quoting Johnson, 897 F. Supp. at 86). The court concluded that
Ҥ 504(d) addresses only the substantive standards for determining what conduct violates the
Rehabilitation Act, not the definition of who is covered under the Rehabilitation Act.”

Id.

(emphasis in original).
Likewise, in Fleming—the most recent circuit court decision to address the issue—the
Ninth Circuit held that independent contractors were covered under the Rehabilitation Act
because Title I is only selectively incorporated. Fleming, 587 F.3d at 946. The Ninth Circuit
reached this conclusion for four reasons. First, the scope of the Rehabilitation Act is broader
than the ADA. Id. at 941-42. Second, Congress did not use language of incorporation when it
referred to the ADA in § 504. Id. at 942-43. Third, “jot-for-jot incorporation would substantially
narrow the scope of the Rehabilitation Act.” Id. at 943-45. And fourth, complete incorporation of
Title I would result in “substantial duplication between the Rehabilitation Act and the ADA—
perhaps inconsistent duplication—in the definitions of key terms.” Id. at 945.
The Fifth Circuit has never directly addressed whether an independent contractor is
covered under the Rehabilitation Act.

It has, however, found that an employer-employee

relationship is a prerequisite in civil rights employment discrimination suits. Luna v. Roche, 89
F. App’x 878, 881 (5th Cir. 2004). In Luna, a retired Air Force veteran brought suit against the
Secretary of the Air Force alleging that the Air Force discriminated against him when it
terminated his disability retirement benefits. Id. at 880-81. The plaintiff brought claims under
Title VII of the Civil Rights Act, the Age Discrimination in Employment Act, the Equal Pay Act,
and the Rehabilitation Act.

Id. at 881.

The Fifth Circuit found that “[t]he employment

discrimination claims raised by [the plaintiff] require[d] the existence of an employer-employee
relationship,” and therefore the plaintiff lacked standing to pursue his claims because he was
not an employee at the time his benefits were terminated. Id. The court, however, made this
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assertion without any discussion of the Rehabilitation Act itself or the Title I issue that animates
the circuit split described above.
But even though the Fifth Circuit has yet to consider the specific issue raised here, this
Court is guided by the Fifth Circuit’s holding that “employment discrimination claims” under the
Rehabilitation Act “require the existence of an employer-employee relationship.” Id.; Tubre v.
Clark McCarthy Healthcare Partners, No. 14-1149, 2014 WL 6469414, at *2 (E.D. La. Nov. 17,
2014) (“Although the decision in Luna is at odds with the Ninth Circuit’s holding in Fleming,
which extends the Rehabilitation Act’s protection to independent contractors, this Court is
guided by the Fifth Circuit.”). Perhaps the Fifth Circuit would reach a different conclusion if
presented with the specific questions raised in the present litigation, but that is not for this Court
to decide. Rather, it is this Court’s duty to apply the Fifth Circuit’s law as it stands today, and
thus Dr. Flynn, as an independent contractor, does not have standing to sue Defendants under
the Rehabilitation Act. Accordingly Defendants’ Motions for Summary Judgment are granted
insofar as they pertain to Plaintiff’s claims under the Rehabilitation Act of 1973. 2
B.

Breach of Contract
In addition to her civil rights claims, Plaintiff asserts that Defendants’ conduct amount to

a breach of contract. (Am. Compl., at 8). Dr. Flynn alleges that Defendants breached their
contract with her in two ways: (1) they did not have the right to terminate her contract in the first
place and (2) they did not use the proper channels to notify her of her termination. Id. at 8-9.
First, Defendants argue that Plaintiff lacks standing to sue as an individual for a contract
that was executed by the limited liability company that she manages. Plaintiff was not a party to

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Plaintiff does not specifically name the federal statute under which she is seeking relief for her
reasonable accommodation and hostile work environment claims. Both the Amended Complaint and
Plaintiff’s responses to Defendants’ summary judgment motions indicate that Plaintiff brings these claims
under the Rehabilitation Act, not the ADA. (Am. Compl., at 1; Resp. to Spectrum, at 7-11; Resp. to
Distinctive, at 9-13). But either way, the result is the same: Plaintiff lacks standing because she was an
independent contractor, not an employee. 42 U.S.C. §§ 12111(4), 12112(a); see also Flannery v.
Recording Indus. Ass’n of Am., 354 F.3d 632, 642 (7th Cir. 2004) (recognizing that the ADA protects
employees but not independent contractors).

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the Independent Contractor Agreement at issue here. Rather, at the time of the alleged breach,
the only contract in effect was between Distinctive and Skwids and Skwiggles. (Distinctive’s
Mot. Summ. J., App’x 3, Ex. B). The general rule in Texas is that “[a] member of a limited
liability company lacks standing to assert claims individually where the cause of action belongs
to the company.”

Berrera v. Cherer, No. 04-13-00612-CV, 2014 WL 1713522, at *2 (Tex.

App.—San Antonio Apr. 30, 2014, no pet.); see also L & F Homes & Dev. L.L.C. v. City of
Gulfport, 538 F. App’x 395, 408 (5th Cir. 2013) (finding that the sole shareholder of limited
liability company lacked standing to assert claims in his own name for injuries sustained by the
company); Baisden v. I’m Ready Productions, Inc., 693 F.3d 491, 509 (5th Cir. 2012) (holding
that a member of a limited liability company lacked standing to assert claim in his personal
capacity for tortious interference with contract when the contract was entered into by the
company); Nauslar v. Coors Brewing Co., 170 S.W.3d 242, 250 (Tex. App.—Dallas 2005, no
pet.) (“An individual stakeholder in a legal entity does not have a right to recover personally for
harms done to the legal entity.”) (citing Wingate v. Hajdik, 795 S.W.2d 717, 719 (Tex. 1990)).
Plaintiff has failed to meet her burden of providing any argument or evidence for why this
general principle should not apply here. Defendants are therefore entitled to summary judgment
on Plaintiff’s contract claims because Plaintiff lacks standing to sue under the Independent
Contractor Agreement.
But even if Plaintiff did have standing to sue both Distinctive and Spectrum, her state law
breach of contract claims would fail. First, Distinctive had authority to terminate its contract with
Skwids and Skwiggles. The Independent Contractor Agreement provides that “[n]otwithstanding
anything to the contrary, [Distinctive] may immediately terminate this Agreement upon giving
written notice of termination to Contractor” if Distinctive received a request “that Contractor or
Physician be removed from the schedule or not provide Services hereunder at Facility.”
(Distinctive’s Mot. Summ. J., App’x 7, at 2). On May 30, 2013, Distinctive received an email

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from the government requesting Dr. Flynn’s removal. (Distinctive’s Mot. Summ. J., App’x 3, Ex.
C, at 1). A memorandum attached to the email stated:
Currently Dr. Flynn . . . is not meeting the needs of the contract.
Her personal interactions with both the patients and the staff have
created a negative work environment and she is having significant
difficulties meeting the demands of being a [primary care
manager]. It would be in the best interest of the clinic if this
position was filled by another provider . . . .
Id. at 3. This email triggered Distinctive’s right to immediately terminate its contract with Skwids
and Skwiggles, and Dr. Takao informed Dr. Flynn that her contract was terminated soon
thereafter. (Resp. to Spectrum, Ex. 1, at 18, 28; Distinctive’s Mot. Summ. J., App’x 3, at 4-5).
Second, even though Distinctive concedes that it failed to communicate Dr. Flynn’s
termination by certified mail, Distinctive did not breach the contract because the notice they
provided substantially complied with the notice provision in the Independent Contractor
Agreement. The Agreement provides that “[n]otice to be given by either party hereunder shall
be given in writing by prepaid certified mail or prepaid express delivery to the other party.”
(Distinctive’s Mot. Summ. J., App’x 7, at 3). Distinctive failed to do this. Instead, on Distinctive’s
orders, Dr. Takao—a Spectrum employee who managed Distinctive’s contract pediatricians at
the Lackland Facility—called Dr. Flynn and informed her that her contract was terminated.
(Resp. to Spectrum, Ex. 1, at 18, 28; Distinctive’s Mot. Summ. J., App’x 3, at 4-5).
The doctrine of substantial compliance is well established under Texas law. See Barbier
v. Barry, 345 S.W.2d 557, 562 (Tex. Civ. App.—Dallas 1961, no writ) (holding that notice that
failed to adhere to the technical requirements of the contract substantially complied with the
contract and was thus effective); see also Texas Utils. Elec. Co. v. Aetna Cas. & Sur. Co., 786
S.W.2d 792, 794 (Tex. App.—Dallas 1990, writ denied) (rejecting argument that the notice
provision in a bond must be strictly complied with). This doctrine “excuses a party’s deviations
from a contractual requirement, but only if those deviations do not severely impair the purpose
of the requirement.” South Texas Elec. Co-op v. Dresser-Rand Co., 575 F.3d 504, 508 (5th Cir.
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2009) (applying Texas law).

Here, summary judgment evidence establishes that Dr. Flynn

received actual notice of the termination on May 30, 2013, (Resp. to Spectrum, Ex. 1, at 28),
and Dr. Flynn has provided no evidence to either rebut that she received actual notice or explain
how this form of notice “severely impair[ed] the purpose” of the Agreement’s notice requirement.
Id.; cf. Redland Ins. Co. v. Sw. Stainless, L.P., 181 S.W.3d 509, 512 (Tex. App.—Fort Worth
2005, no pet.) (holding that because surety received actual notice, subcontractor’s need to
comport with statutory requirement that notice be sent certified mail was negated). Indeed, Dr.
Flynn did not even mention her contract claims in her responses to Defendants’ dispositive
motions other than to state that “[t]he termination of the contract in the manner in which it was
done also constituted a breach of the Plaintiff’s contract.” (Resp. to Spectrum, at 15; Resp. to
Distinctive, at 14).

Therefore the Court concludes the notice provided by Distinctive

substantially complied with the notice requirement set forth in the Independent Contractor
Agreement.
Dr. Flynn, individually, lacks standing to bring breach of contract claims that arise from a
contract executed by the limited liability company that she manages. Moreover, Dr. Flynn has
failed to create a genuine issue of material fact regarding whether or not Defendants breached
the Independent Contractor Agreement between Distinctive and Skwids and Skwiggles.
Accordingly Defendants’ motions for summary judgment should be granted insofar as they
pertain to Plaintiff’s contract claims.
IV. CONCLUSION
For the reasons stated herein, Plaintiff Rochelle Flynn, as an independent contractor,
does not have standing to bring claims under the Rehabilitation Act. Moreover Plaintiff both
lacks standing to sue under the Independent Contractor Agreement and has failed to create a
genuine issue of material fact regarding whether Defendants breached the contract by
terminating Plaintiff’s position or by failing to notify Plaintiff of the termination by certified mail or
express delivery. Accordingly,
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IT IS ORDERED that Defendant Spectrum Healthcare Resources, Inc.’s Motion for
Summary Judgment (Dkt. #22) is GRANTED.
IT IS FURTHER ORDERED that Defendant Distinctive Home Care, Inc.’s Motion for
Summary Judgment (Dkt. #23) is GRANTED.
IT IS FURTHER ORDERED that Defendant Spectrum Healthcare Resources, Inc.’s
Motion to Dismiss Pursuant to Fed. R. Civ. P. 12(b)(6) (Dkt. #22) is DISMISSED as moot.
Signed March 5, 2015.

_______________________________
ROBERT L. PITMAN
UNITED STATES DISTRICT JUDGE

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