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Workplace Religious Discrimination Claims under the Missouri Human Rights Act Analyzed in Shiffman v. Kansas City Royals Baseball Club

15 May 2024

ABSTRACT: The Western District Missouri Court of Appeals in Shiffman v. Kansas City Royals Baseball Club, LLC recently reviewed a claim of religious discrimination that failed at the trial court level. The Court analyzed the applicable standards for an employee-plaintiff offering direct evidence versus indirect evidence of religious discrimination. As there was insufficient direct or indirect evidence to support a discrimination claim, the court affirmed the trial court’s granting of the Royals’ motion for summary judgment.

The Western District Missouri Court of Appeals recently reviewed the essential elements of a submissible claim of religious discrimination under the Missouri Human Rights Act. In Shiffman v. Kansas City Royals Baseball Club, LLC, a terminated employee Steve Shiffman asserted claims against his former employer, the Kansas City Royals, for religious discrimination, age discrimination, and related retaliation, and hostile work environment.

Shiffman was a ten-year employee with the Royals holding the title of Senior Director of Ticket Sales and Services at the Kauffman Stadium, reporting to the Vice President of Marketing and Business Development. In this position, Shiffman oversaw the sale of individual, group, premium tickets, and suites. His direct report had previously been responsible for the sales process and related staff for ticket sales. Over time, Shiffman’s junior employee became responsible for the daily operations of the Ticket Sales and Services Department.

After the Royals were sold in November 2019, its new senior management team undertook a review of the Royals’ operations, including the Ticket Sales and Services Department. After that review, and a shift in duties between Shiffman’s junior employee and Shiffman’s manager, the Royals’ management determined that his position as Senior Director should be eliminated as redundant, and Shiffman was terminated shortly before his sixtieth birthday. The Royals did not replace Shiffman, nor did they promote his junior employee.

In his petition, Shiffman advanced four claims: religious discrimination, age discrimination, retaliation, and a hostile work environment. In support of his claims, Shiffman referenced comments made by a Royals’ senior manager, in the presence of other employees, which he alleged reflected negatively on his faith.

Responding to the Royals’ Motion for Summary Judgment, he characterized the manager’s statement as “referencing an issue with getting the Jewish community center’s consent to use their logo on the Royals’ website.” Shiffman also claimed that he reported the comment to the human resources department but did not have an opportunity to place a written complaint prior to his termination.

In a more conclusory manner, Shiffman had claimed in his petition that he was subjected to a hostile work environment based on harassment and discrimination of, among other things, improper discipline and attacks on his character. Shiffman alleged that the harassment was driven by his age, religion, and prior complaints, all of which were known, or should have been known, by the Royals’ management. The Royals moved for summary judgment, which the trial court granted.

On appeal, Shiffman argued that, as to his religious discrimination claim, the trial court record included sufficient evidence to allow a jury to find that his termination was motivated by his religion. In its ruling, the Court of Appeals noted the different analyses that apply to claims involving direct evidence of discrimination, and those involving only circumstantial evidence. A prima facie case of religious discrimination based on direct evidence requires an adverse employment action, a showing that the motivating factor was religion, and that the employee suffered damage. But in his reply to the Royals’ motion for summary judgment, Shiffman admitted that he relied exclusively on circumstantial evidence to support his claim. As there was no direct evidence of religious discrimination, the trial court was then required to apply the familiar burden-shifting framework of McDonnell Douglas v. Green, developed decades ago with respect to federal-law discrimination claims.

Under that analysis, the Western District found that three of the four McDonnell Douglas requirements were met. First, the plaintiff, who is Jewish, is a member of a protected class due to his religious affiliation or beliefs. Second, he had a satisfactory work record and therefore had met the employer’s reasonable expectations. Third, the employee experienced an adverse employment action (his termination when his job was eliminated). As to the fourth requirement, however, the Court agreed with the trial court that the circumstances did not support an inference of religious discrimination. Consequently, the burden of production did not shift to the Royals to rebut a presumption of discrimination by producing evidence that Shiffman’s job elimination and layoff were based on legitimate and non-discriminatory reasons.

The Court noted that even if the burden had shifted to the Royals, the Royals articulated legitimate, non-discriminatory reasons for their decision (elimination of a redundant position), and Shiffman failed to identify any other similarly situated employees outside of his protected class treated more favorably or differently than himself. Furthermore, Shiffman only identified one offensive comment made by a single co-worker related to his religion. The Western District cited a federal court opinion for the proposition that a “single, isolated, offensive comment is insufficient to support an inference of religious discrimination.” In fact, the Court found nothing in the record demonstrating that the co-worker’s comment had any connection with his termination.

Again, even if the McDonnell Douglas framework were applicable, the Western District noted that the burden would have reverted to Shiffman after the Royals rebutted the presumption of discrimination. Shiffman had failed, however, to advance any credible evidence exposing the Royals’ actions in the termination decision as a mere pretext for intentional discrimination. As such, the appellate court found that the trial court properly granted the Royals’ Motion for Judgment as it related to religious discrimination.

Successful Missouri employers are well acquainted with both the MRHA and federal law prohibitions against workplace discrimination. The Shiffman opinion serves as a reminder that analytically, principles of federal anti-discrimination law may be applied to MHRA claims. In this case, the Court properly observed that one isolated offensive comment generally cannot support an employment law claim. But a prudent employer that becomes aware of an inappropriate comment should consider the need for corrective action, to prevent further misconduct that may be actionable. Coordination with employment law counsel can be helpful in mitigating the potential risks of a workplace claim of religious or any other form of discrimination.

Sanction of Dismissal with Prejudice Approved for Repeated Discovery Violations

07 May 2024

ABSTRACT: A Missouri Court of Appeals, Western District ruling affirmed the dismissal of an action as a discovery sanction based on a “contumacious and deliberate disregard for the authority of the trial court.”

In Noble v. L.D. Enterprises, Inc. the Missouri Court of Appeals, Western District affirmed a dismissal with prejudice for Plaintiff’s repeated refusal to engage in discovery.

Plaintiff Brandie Noble fell in a parking lot that was controlled by Defendant L.D. Enterprises on July 14, 2014, purportedly sustaining injuries that required medical treatment. Over four years later, Noble filed a lawsuit seeking damages for her injuries. This lawsuit was voluntarily dismissed by Noble on November 2, 2020 and refiled on October 18, 2021, shortly before the expiration of the statute of limitations.

On May 25, 2022, L.D. Enterprises served their Opening Interrogatories and First Request for Production of Documents to Plaintiff. Noble, who was represented by counsel, failed to respond within the time allotted, and L.D. filed a motion to compel. Noble also failed to respond to the motion to compel and the trial court ordered Noble to respond to the discovery requests within 30 days. Noble did not, however, answer the defendant’s discovery.

On December 13, 2022, L.D. filed a motion to dismiss Noble’s petition with prejudice as a sanction for her failure to respond to outstanding discovery. Again, Noble failed to respond. At the hearing for the motion, Noble delivered a “box of documents” to L.D., including incomplete responses to interrogatories. Neither the responses to the interrogatories nor requests for production were signed and no certificates of service were provided. The motion to dismiss was taken under advisement by the trial court.

L.D filed a renewed motion to dismiss Noble’s petition with prejudice alleging the discovery responses remained unverified, unsigned, and deficient in violation of the court’s earlier order. L.D. further noted the claim was now nearly nine years old and L.D. had been forced on three different occasions to file motions to obtain relief. Again, Noble failed to respond to the motion.

The trial court sustained the motion to dismiss, noting the failure of Noble to properly respond to court ordered discovery even while her claim faced dismissal with prejudice. Noble filed a motion for reconsideration arguing, among other things, that dismissal of her petition with prejudice was an excessive sanction. Noble stated such sanctions are reserved for when an "offending party exhibits repeated and protracted failure to comply with the rules of discovery." The trial court denied Noble’s motion to reconsider.

Noble appealed. The appellate court ruled that the trial court did not abuse its discretion in dismissing Noble’s complaint with prejudice. The court held trial courts have an obligation to ensure discovery rules are followed and approved the discretion to impose sanctions that are “just.” The appellate court noted Noble repeatedly failed to comply with the rules of discovery constituting a “contumacious and deliberate disregard for the authority of the trial court.” As a result, the appellate court upheld the dismissal of Noble’s petition with prejudice.

Key Takeaways

The court’s opinion illustrates several key points for consideration by companies and their advisors alike:

A circuit court is vested with broad discretion in administering the rules of discovery and in determining the proper remedy—including dismissal with prejudice—for a party's non-compliance with court-ordered discovery.
Appellate courts will only review such decisions to determine whether the trial court abused its discretion in ordering such sanctions.
A “contumacious and deliberate disregard for the authority of the trial court” by either party is sufficient to uphold a decision to dismiss a claim with prejudice.

Kansas City Area Returns to Pre-Pandemic Jury Verdict Trends

01 Apr 2024

ABSTRACT: Yearly data released by the Greater Kansas City Jury Verdict Service shows the number of jury verdicts climbed back to pre-pandemic levels. In 2023, there was an increase in the average value of plaintiff-friendly jury verdicts even with outlier verdicts removed from the calculus. Jackson County, Missouri continues its streak of being the most plaintiff-friendly venue across the Kansas City area.

Number of Jury Trials Return to Pre-Pandemic Totals

According to the Greater Kansas City Jury Verdict Service, the total number of jury trials in the Kansas City metropolitan area has risen every year since the COVID-19 pandemic. In 2023, jury trials are up approximately 30% from 2022 and continue to rise toward pre-pandemic levels.

Greater Kansas City Jury Verdict Service Year-End Reports 2014-2023

Plaintiff-Friendly Verdicts Return to Pre-Pandemic Trend

In 2023, there were a total of 217 verdicts (cases oftentimes involve multiple verdicts). Of the verdicts reported, 48% (104 out of 217 claims) resulted in some amount of recovery for the plaintiff(s). In other words, defendant(s) obtained a full verdict in 52% of verdicts. This defense “win” percentage is similar to what we saw in 2022 with 51% of verdicts. However, the Greater Kansas City area saw a three-year stretch of nearly 60% defense verdicts from 2019 to 2021. The plaintiff-friendly trend seems to reflect the pre-pandemic trend more accurately, which saw plaintiff verdicts rise from 38% in 2014 to 48% in 2018.

However, those verdicts consider numerous categories of claims. Specifically, regarding auto-related claims, 78% of claims resulted in some amount of recovery for plaintiff(s). Of the six wrongful death verdicts (three auto-related, three other), plaintiff(s) were awarded compensation in 100% of those verdicts. The average verdict award in auto-related wrongful death cases was $23,613,333.

Overall Average Monetary Award for Plaintiffs Increased Last Year

The overall average value of favorable plaintiff verdicts, without outliers, increased considerably in 2023. The overall average of plaintiff verdicts in the Kansas City area in 2023 was $20,117,952, which included one $1.785 billion dollar verdict from the Western District of Missouri, and three verdicts totaling $70 million from Platte County. When the outlier verdicts are set aside, the average jury award for 2023 was $1,113,929.47. In 2022, excluding two outlier verdicts totaling approximately $53 million, the average plaintiff award was $564,213. In 2021, the average value of verdicts favoring plaintiffs, without outliers, was $635,000. The 2023 overall average plaintiff verdict value is a steep increase from the previous six-year average.

Jackson County, Missouri Continues Plaintiff-Friendly Run

Jackson County, Missouri has historically churned out more plaintiff-friendly verdicts than the other venues in Greater Kansas City, and 2023 was no exception. Of the 84 claims tried by Jackson County, Missouri juries, 55% favored the plaintiff, with the average award value of all plaintiff verdicts in Jackson County, Missouri being $1,305,793.

Additionally, Jackson County, Missouri juries handed out 13 verdicts worth $1 million or more, which represents more than a third of all million-dollar jury verdicts in the Greater Kansas City venues. Moreover, of the 45 verdicts across the Greater Kansas City venues valued between $100,000 and $999,999, more than half were in Jackson County, Missouri.

When Artificial Intelligence leads to Genuine Stupidity

28 Mar 2024

ABSTRACT: The Eastern District of the Missouri Court Appeals addresses the use of Artificial Intelligence in preparing appellate pleadings and more specifically, the citation to fictitious legal authority. The court noted that citation to such “bogus” authority was a flagrant violation of a litigant’s duty of candor to the court.

A February 13, 2024 opinion by the Missouri Eastern District Court of Appeals in Kruse v. Karlen addressed for its first time the use of generative A.I. to create fictitious legal authority and a litigant’s citation to that authority. The trial court in Kruse awarded a former employee, Molly Kruse (Former Employee), over $311,000 in unpaid wages, penalties, and attorneys’ fees in granting her motion for summary judgment for the former employers’ failure to pay her for work performed and two unsatisfied promissory notes given to secure the unpaid salary. Jonathan Karlen (Former Employer) filed a pro se appeal in the Eastern District, including a Record on Appeal, unsigned Appellate Brief, and Reply Brief, but no Appendix and other required pleadings. Former Employee filed a Motion to Strike for failure to comply with the Rules of Appellate Procedure on multiple issues, including inaccurate citations and fabricated legal authority, which the court took with the appeal.

The Court of Appeals first noted that the Former Employer’s pleadings nearly completely failed to comply with the Rules of Appellate Procedure. Despite being granted an extension of time to file the required Appendix on appeal, as of the date of the opinion it had still not been provided to the court. Former Employer further infringed the appellate rules by failing to articulate his Points Relied On for appeal and failing to follow specific requirements for properly preparing a Statement of Facts, Statement of Issues, Table of Contents, and Table of Authorities. All of these were grounds for the Eastern District to dismiss the appeal. To make matters worse, Former Employer filed a reply brief containing fictitious case citations, in which he admitted to hiring a supposedly licensed California legal “consultant”, but denied knowing the consultant would use A.I. in identifying relevant caselaw.

As such, the Eastern District addressed for its first time a litigant’s citation to legal authority fabricated by using generative A.I. By way of example, the court noted that Former Employer’s brief cited a quoted portion of a purported Missouri opinion Smith v. ABC Corporation. Both the legal quotation and the case itself are nonexistent, the case citation belonging to a Texas state court family law opinion. The Eastern District continued to note that Former Employer’s brief included citations to twenty-two fictitious cases, and only two citations to genuine caselaw.

Not surprisingly, the Eastern District noted that the citation to “bogus” legal authority constituted a flagrant violation of Former Employer’s duties to the court. Citing Rule 55.03, the court stated that by maintaining a claim, an attorney or party certifies that the legal contentions are supported by existing law or non-frivolous argument. As such, citation to fictitious authority, to either persuade a court or used against an opposing party, is an abuse of the adversarial system. For the significant violations of Rule 84.04 the court dismissed the appeal.

Following the dismissal, the Eastern District continued to the matter of sanctions for filing a frivolous appeal. Noting its discretionary authority to award monetary damages to the Former Employee, the court explained that an appeal is frivolous when it is so deficient that it strains the resources of the court and the opposing party. The appellate court pointed out that the court routinely grants unrepresented litigants reasonable accommodations so long that the court does not act as advocate, but Former Employer’s appellate brief went beyond simply faulty pleadings. His actions required Former Employee to expend unnecessary resources to, among other things, identify fabricated cases submitted to the court in support of what the Eastern District characterized as an appeal wholly lacking in merit. The court determined that awarding Former Employee damages towards attorneys’ fees of $10,000 as an appropriate message to others regarding the importance of compliance with court rules and providing the court with authentic authority supporting meritorious arguments.

In Kruse, the Eastern District made clear that the use of A.I. to generate fictitious authority would not be tolerated. Practitioners should note that as generative legal A.I. continues to evolve into greater capacities and expansion into diverse platforms, they must be mindful of its use both for themselves and by other parties in litigation.

Missouri Supreme Court Reverses Trial Court, Finding Plaintiff Failed to Present Submissible Negligence Claim Under the "Known Third Person" Exception to the Third-Party Criminal Act Rule.

24 Jan 2024

ABSTRACT: The Missouri Supreme Court has explained the boundaries of the “Known Third Person” exception to the general rule that businesses have no duty to protect invitees from the criminal acts of third persons.

The Missouri Supreme Court, in Harner v. Mercy Hospital Joplin, has clarified the evidence necessary to establish the “Known Third Person” exception to the general rule in Missouri that businesses have no duty to protect invitees from the criminal acts of third persons. Mercy appealed a trial court judgment after a verdict was entered for Steven Harner on his negligence claim alleging Mercy breached its duty to protect him from the criminal acts of a third person. Harner was shot by Kayla Liska after Harner found her inside his unlocked vehicle parked in the Mercy parking lot. Before the altercation, Liska had been in the lot for approximately 90 minutes. She had twice approached another individual, but these encounters had not been reported to Mercy. Liska also entered another unlocked vehicle and, when confronted by the vehicle owners (the Wooldridges), Liska exited the car and stole a case of medication. The Wooldridges reported being robbed to Mercy security which, in turn, reported the incident to the police department. The Wooldridges reported a “theft” to police, but confirmed Liska did not have a weapon, and did not yell at, threaten, or make any physical contact with them. The police officer testified that no evidence “suggested Liska posed a threat to anyone at Mercy.”

While the Wooldridges were inside the hospital speaking with security and police, Liska entered Harner’s vehicle. The Mercy security dispatcher testified she failed to review surveillance video, as requested by police, and that such footage captured Liska exiting the Wooldridge vehicle and entering Harner’s vehicle. The jury awarded damages of $1,500,000 to Harner for negligence, after assessing 75% fault to Mercy.

Mercy asserted on appeal that the trial court erred in overruling its motion for judgment notwithstanding the verdict, contending that Harner presented insufficient evidence that Mercy owed a duty to protect Harner from Liska’s criminal act. The Supreme Court explained Missouri precedent that businesses generally have no duty to protect invitees from the criminal acts of unknown third persons because such activities are rarely foreseeable. A limited “known third person” exception to the general rule may apply, however, when a business “knows, or has reason to know, that a third party is harming or is about to harm an entrant.” The Supreme Court clarified that this exception only applies when “a person, known to be violent, is present on the premises or an individual is present who has conducted himself so as to indicate danger and sufficient time exists to prevent injury.” The Court summarized that the business must know or have reason to know “a specific third person is both (1) on its premises and (2) dangerous.”

The Supreme Court explained that the issue on appeal boiled down to whether Mercy knew Liska was dangerous prior to the shooting such that a duty of care arose. Viewing the evidence in the light most favorable to the verdict, the Court concluded that there existed no evidence that Liska had conducted herself in a dangerous or threatening manner. The Court found that there was no evidence from which Mercy could have known Liska would become violent, as she had not engaged in any verbal or physical altercations on Mercy's premises. There was no evidence Liska had or would likely use a gun prior to her use of Harner's unsecured and loaded pistol, which she found inside his unlocked vehicle. From the Wooldridge report, Mercy merely knew Liska had, without force, entered an unlocked vehicle and fled as soon as she was encountered, taking medications from the vehicle. The Supreme Court concluded it was not foreseeable under the facts and circumstances of the case that Liska would become violent or dangerous. Conceding Liska had committed the crimes of breaking into vehicles and stealing property, the Court held that “not every crime renders it reasonably foreseeable that a person is dangerous” and that “the exception's focus on foreseeability would be lost if having knowledge of any previous criminal act of a known third person is sufficient to incur liability for any subsequent dangerous and criminal acts that person commits.” The Court held that Liska’s actions prior to the shooting did not trigger the known third person exception to the general rule that businesses have no duty to protect invitees from the criminal acts of third parties. The verdict for Plaintiff was reversed and the case was remanded to the trial court.

To achieve the same result as Mercy Hospital, business owners and security providers need to understand the general law of negligence in the context of third-party criminal activities. In the case of crimes committed by known third persons, particular attention should be paid to evidence of the person’s dangerousness and the character of the person’s prior criminal conduct. As the Supreme Court clarified in Harner, not all criminal activity is alike, and a person’s commission of prior crimes does not necessarily render the person foreseeably dangerous.

"Judicial Hellholes" – Cook County rises to number 2 while St. Louis, St. Clair and Madison County Hold Steady

29 Dec 2023

ABSTRACT: Cook County, Illinois jumps from number 5 to number 2 in the country on the 2023/2024 American Tort Reform Foundation’s “Judicial Hellholes Report,” with the help of BIPA, while St. Louis, Missouri, St. Clair and Madison County Illinois hold their ground thanks to asbestos litigation.

Cook County, Illinois moved up significantly within the top 10, now ranked as the second worst Judicial Hellhole, as Illinois courts and legislature continue to fortify the jurisdiction as one of the most plaintiff-friendly jurisdictions across the United States.

As we anticipated from last year’s trends, filings of “no injury” Biometric Information Privacy Act (“BIPA”) litigation have choked Illinois courts, with seminal rulings in 2023 setting the stage for spurring filings even higher. This legislation requires companies to inform an individual in writing and receive a written release prior to obtaining or retaining personal biometric data, setting statutory minimum damages from $1000 to $5000 to automatically be awarded for each BIPA violation, regardless of the actual injury suffered. February 2023 saw the Illinois Supreme Court expand the statute of limitations for BIPA lawsuits beyond the one-year default limitation period for privacy actions, to a five-year statute of limitations. Tims v. Black Horse Carriers, Inc., 2023 IL 127801, 216 N.E.3d 845 (2023).

Mere weeks later, also in February 2023, the Illinois Supreme Court exponentially expanded potential BIPA liability claims, by ruling that a BIPA claim is created each time a business scans the person’s biometric information and each time it is transmitted to a third party. Cothron v. White Castle System, 2023 IL 128004, 216 N.E.3d 918 (2023). Previously claims were only created for the initial scan and initial transmission to a third-party, but now under the Court’s ruling, new violations are created each time an employee logged into a work computer system, multiplying the viable claims hundreds or thousands of times over per employee. The plaintiffs’ bar has been paying close attention to these rulings, as BIPA filings spiked 65% in the next two months after these decisions. BIPA suits have proven so lucrative that the Illinois Supreme Court has also signaled that it will not be swayed by policy arguments related to increasing excessive verdicts from this litigation, instead punting the issue to be addressed by the legislature.

Based on laws passed by the Illinois legislature and enacted by Governor J.B. Pritzker in 2023, it does not appear that any help will be forthcoming to Illinois businesses from the legislature. In August, Governor Pritzker signed into law H.B. 219, which was fast-tracked through both houses of Illinois’ Congress on a wave of support by the Illinois plaintiffs’ attorneys’ bar association and prominent Cook County plaintiffs’ firms. This law amended Illinois’ wrongful death statute to allow for the recovery of punitive damages in most wrongful death cases. Unlike many other jurisdictions, Illinois also does not cap punitive damages generally, so the Illinois amended Wrongful Death Act now provides a forum unique to most other jurisdictions where unlimited punitive damages can now be sought in wrongful death actions. At the same time, Governor Pritzker also signed H.B. 2231 into law, removing liability protections against rideshare companies like Uber and Lyft, newly categorizing such companies as common carriers, who are now subject to vicarious liability for accidents resulting from their employee drivers.

Illinois courts’ rulings and the enactment of these new laws will likely only exacerbate the already high number of case filings and exceedingly high jury verdict awards. Illinois verdicts have historically been some of the highest in the country on average, even before the COVID-19 pandemic of 2020, ranking as high as fourth place in number of nuclear verdicts over $10 million. However, in September 2023 a Cook County jury set the Illinois record for the largest verdict for a single plaintiff in a personal injury action, awarding $363 million including $325 million in punitive damages. Susan Kamuda and Edward Kamuda et. al. v. Sterigenics U.S. LLC, et. al.No. 2018L010475. These recent court rulings and laws enacted all but make certain that this new record will soon be eclipsed.

Illinois’ courts’ rulings and newly enacted laws along with the already vibrant asbestos litigation throughout Illinois is why both Madison County and St. Clair County are, yet again this year, on the judicial hellhole “Watch list.”

Although Madison County and St. Clair County have fallen off the list, St. Louis has also held strong at number 8 for the last two years thanks to the junk science that has been allowed in cases involving Monsanto and its Roundup week killer, talc, and asbestos cases. But the juries are not just giving nuclear verdicts when junk science is involved. The Karen Chaplin et al v United Brands Products Design Development et al, 20SL-CC06071, known as the ‘Whip-it’ case, is a great example of the nuclear verdicts coming out of St. Louis. In September, a jury awarded $745 million to the parents of a 25-year-old woman killed on a sidewalk outside an urgent care center by a driver who huffed nitrous oxide canisters, “Whip-it”, right before the accident. The two-week case focused on United Brand Products distributing nitrous oxide under the name Whip-It and their conspiracy with a smoke shop to sell the product to customers they knew intended to illegally inhale the gas to get high. The jury bought into the plaintiffs’ argument that United Brands Products should be held responsible for the illegal use of their legal product Whip-It by Mr. Geiger, assessing 70% of the $745 million verdict to United Brands Products.

The Missouri Legislature is not helping as legislative reform has stalled and bills like S.B. 31 get pushed through thanks to the help of the plaintiffs’ bar. S.B. 31 included an overhaul of the collateral source rule in Missouri. It opens a loophole to inflate damages by allowing plaintiffs’ lawyer to introduce evidence of inflated medical bills to show the severity of plaintiff’s injuries, rather than the actual amount of damages sought. This causes “Phantom Damages,” an inflated damages award.

Illinois and Missouri have a long road ahead of them in order to get off the “hellhole list,” and this can only be accomplished through enacting stricter reforms that limit lawsuit abuse, and judiciaries who maintain a sense of balance.

Illinois and Missouri are not the only States with issues. The national ‘hellhole list’ is led by Georgia, the Philadelphia Court of Common Pleas, and the Supreme Court of Pennsylvania, tied at the top; and Cook County, Illinois moving up the list (#2). Holding strong at their previous status are California (#3), New York (#4), South Carolina asbestos litigation (#5), and Louisiana (#7). New to the list is Lansing, Michigan (#6) earning thanks to the Michigan Supreme Court and Michigan Legislature expanding premises and workplace liability and adopting an expansive approach to medical liability.

The upcoming year will show if Mallory v Norfolk Southern Railway Co. opens the doors for these already plaintiffs’ friendly jurisdictions. Plaintiffs’ now have the ability to drag out-of-state defendants into ‘hellholes’ that have little or no connection to the case at hand.

Old Navy's discounted sales failed to provide basis for valid Missouri Merchandising Practices Act claim.

27 Dec 2023

ABSTRACT: Eighth Circuit Court of Appeals holds that a customer failed to sufficiently plead that she suffered an “ascertainable loss,” which is an essential element of a Missouri Merchandising Practices Act claim. Notwithstanding her assertion that the advertised price was not truly a “sale” price, the customer paid the prices advertised at the time of the sale and received the goods she expected to receive. The MMPA claim was thus properly dismissed.

Retail customer Jill Hennessy brought a putative class action against clothing retailers The Gap, Inc. and its wholly owned subsidiary, Old Navy, LLC. Hennessy claimed she purchased numerous products at Old Navy stores at discount prices that were deceptively advertised because Old Navy did not sell a substantial quantity of those products at the advertised “regular” prices for a sufficient time prior to selling them at the advertised “sale” prices. She sought class wide compensatory damages under the Missouri Merchandising Practices Act, alleging that as a result of Defendants' misleading advertising practices, she and the putative class members did not receive the benefit of the bargain Defendants promised them, because the products they purchased from Defendants did not have the higher value that Defendants allegedly represented they had. She also sought equitable relief under the theory of unjust enrichment, claiming it would be unfair for Old Navy retain her payments for the products.

Hennessey claimed the advertised product sale prices were deceptive and misleading because Old Navy did not sell a large quantity of those products at the regular price for a substantial enough time prior to selling them at the discounted sales price—essentially artificially inflating the value of those products. For example, Old Navy’s crew neck T-shirt was listed at a regular price of $14.99 with a sales price of $7.49. Hennessy alleged she was promised a bargain by paying $7.49 for a shirt that was supposedly worth $14.99. According to Hennessey, because the shirt was worth less than $14.99, and potentially worth even less than the $7.49 sales price, she should recover the difference between the actual value of the product and the promised value of $14.99. Hennessey also claimed Old Navy was unjustly enriched by her payments and should compensate her accordingly.

The District Court dismissed the case because the allegations failed to establish the actual market values of the products that Hennessey received were lower than the represented values of those products. Hennessey failed to prove she suffered an ascertainable loss. The lower court also held that Old Navy was not unjustly enriched because Hennessy received the goods expected at the price she willingly paid. Hennessey appealed.

The Court of Appeals affirmed the District Court’s dismissal of the MMPA claim, noting recovery of damages under a private MMPA claim requires a Plaintiff to allege and prove that she: (1) purchased merchandise from the defendant; (2) for personal, family, or household purposes; and (3) suffered an ascertainable loss of money or property, (4) resulting from an act declared unlawful under the MMPA. To determine whether an MMPA plaintiff has suffered an ascertainable loss, Missouri courts generally apply the “benefit of the bargain” rule, which awards a prevailing party the difference between the value of the product as represented and the actual value of the product received. Hennessy merely made speculative, conclusory “information and belief” assertions about the actual value of the products received, but alleged no definitive facts supporting the claim of a higher represented actual value of the products other than the purportedly false assertions that the advertised former price was the represented value. Because the allegations were rooted in fraud, under the Federal Rule of Civil Procedure Rule 9(b) heightened pleading standard—which is similar to Missouri Rule of Civil Procedure 55.15—Plaintiff was required to plead such facts as the time, place, and content of defendant’s false representations, as well as the details of the defendant’s fraudulent acts, including when the acts occurred, who engaged in them, and what was obtained as a result. As Hennessey failed to plead such key information, the Court held she failed to establish an ascertainable loss—and consequently failed to state an MMPA claim.

The Court of Appeals agreed with a growing number of courts by finding complaints based solely on a plaintiff’s disappointment over not receiving an advertised discount at the time of purchase failed to establish the suffering of an ascertainable loss—which is a necessary element of an MMPA claim.

The Court also affirmed the District Court’s dismissal of Hennessey’s unjust enrichment claim. A properly pleaded unjust enrichment claim in Missouri requires: (1) a benefit conferred by a plaintiff on a defendant; (2) the defendant’s appreciation of the fact of that benefit, and (3) the acceptance and retention of that benefit by defendant in circumstances that would render that retention inequitable. Plaintiff’s unjust enrichment claim was based on the same facts as her MMPA claim. However, there can be no unjust enrichment if the parties receive what they intended to obtain—which both parties did here. Moreover, the existence of an express contract precludes a claim of unjust enrichment. Each of Hennessey's product purchases constituted an express contract memorialized by the payment receipt. Accordingly, the Court also dismissed the unjust enrichment claim.

Conclusion:

While plaintiffs may broadly allege questionable and far-reaching MMPA counts in their Petitions and Complaints, this case demonstrates that not all broad allegations will withstand scrutiny. While statutory MMPA claims are not quite the same thing as common law fraud claims, for purposes of Federal Rule 9(b) and Missouri Rule 55.15, they “sound in fraud,” and are subject to those rules’ heightened pleading requirements. Defendants should be ready to challenge generic allegations that lack the requisite specificity under those rules.

Clocking out Injustice: Eighth Circuit Rules Hospital's Timekeeping System Resulted in Systematic Under-compensation.

12 Oct 2023

ABSTRACT: The U.S. Court of Appeals for the Eighth Circuit reversed summary judgment granted in favor of an employer that used an automated timekeeping system, finding that its rounding method resulted in the under-compensation of two-thirds of its employees. Although the court did not rule that all time-rounding was unlawful, it opened the door for plaintiffs to challenge facially neutral rounding policies under the Fair Labor Standards Act (FLSA).

In Houston v. Saint Luke’s Health Sys., Inc., the United States Court of Appeals for the Eighth Circuit reversed the United States District Court for the Western District of Missouri’s grant of summary judgment entered in favor of the employer, finding that its timekeeping system used a rounding method that resulted in under-compensation. Although the Eighth Circuit limited its ruling to the facts of the case, the Court called into question the generally accepted practice of rounding time.

A former employee and other similarly situated employees brought an action challenging Saint Luke’s timekeeping system, claiming that it violated overtime provisions of the FLSA and its regulations by failing to compensate employees for work performed. See 29 U.S.C. § 207(a)(1); 29 C.F.R. § 778.103. The FLSA requires employers to pay overtime compensation to employees who work more than forty hours in a week, though longstanding regulations permits employers to “round” an employee’s time for ease of calculating “worked time.”

The District Court granted summary judgment in favor of Saint Luke’s, concluding that the rounding policy was neutral as applied because: (1) the time lost per shift was insignificant; (2) the rounding policy both added and subtracted time during the period; and (3) on a per-shift basis, the rounding policy took time from about half of the shifts while it added to or left neutral the other half. The Eighth Circuit reversed and remanded the case to the District Court, finding that the “court erred by concluding that the rounding policy was neutral as applied.”

The Eighth Circuit grounded its ruling in the parties’ stipulation that the employees engaged in compensable work at all times “on the clock.” In turn, the Eighth Circuit did not have to adjudicate the significant question of whether all rounded-off time was compensable time. Instead, the only issue on appeal was the narrow question of whether the employees presented sufficient evidence to raise a genuine dispute that Saint Luke’s policy results in systematic under-compensation.

In confronting what it means for a rounding policy to “average[] out” such that employees are compensated properly, the Eighth Circuit relied on Tenth and Ninth Circuit opinions for guidance. Specifically, the Court examined Aguilar v. Mgmt. & Training Corp., 948 F.3d 1270, 1289 (10th Cir. 2020) (finding that if the policy “routinely rounds off . . . compensable overtime, as the officers’ evidence suggests, then the officers’ rounding theory remains viable”); and Corbin v. Time Warner Entm’t-Advance/Newhouse P’ship, 821 F.3d 1069, 1079 (9th Cir. 2016) (holding that a small “fluctuat[ion] from pay period to pay period” was not enough to raise a genuine dispute of material fact as to whether the employer’s rounding policy averaged out over time”). In turn, the Eighth Circuit looked to the data before it, finding that “[n]o matter how one slices the data, most employees fared worse under the rounding policy than had they been paid according to their exact time worked.”

Thus, because Saint Luke’s failed to present evidence to the contrary, the Eighth Circuit concluded that the employees raised a genuine dispute that the rounding policy did not average out over time. The Court reversed and remanded the case to the District Court to consider their ruling.

Implications

Longstanding precedent has recognized the validity of rounding time, as suggested by decades of labor law litigation, and the Eighth Circuit’s ruling in Houston does not upend such precedent. Rather, it recognizes that technological advances in timekeeping have eliminated the “administrative hassle” associated with the old days of punch cards, and that rounding of time, done properly, is still permissible. Nowadays, because modern timekeeping systems produce accurate and detailed databases on when employees clock in and out, it is far easier for challengers to establish that rounding time resulted in systematic underpayment. For businesses that are rounding employee hours in Missouri (which falls within the Eighth Circuit), this would be a good time to audit their practice to make sure it is not resulting in under-compensation and favoring the employer. Baker Sterchi attorneys will continue to monitor this litigation.

Eighth Circuit Affirms Decision that Insurance Company Did Not Violate the Terms of its Policy by Requesting Reimbursement from an Adverse Insurer.

11 Oct 2023

ABSTRACT: The Eighth Circuit Court of Appeals, applying Missouri Law, affirmed an Order granting summary judgment in favor of Owners Insurance Company, finding that a request for reimbursement from an adverse party did not breach the applicable insurance policy or duty of good-faith.

Plaintiffs/Appellants, White Knight Diner, LLC, Larry Lee Hinds and Karen Freiner (collectively “White Knight”) brought suit against their insurer, Owners Insurance Company (“Owners”), seeking a declaration that the practice of settling subrogation claims directly with other insurance providers violated Missouri’s subrogation law. [1] The Eighth Circuit affirmed the Eastern District of Missouri – St. Louis’ grant of summary judgment in favor of Owners.

On March 15, 2015, Ambar Arango and Dzemal Omervic were involved in a car accident, that included one of the cars crashing into the White Knight Diner causing property damage to the restaurant. At the time of the accident, White Knight had an insurance policy issued by Owners that included coverage for property damage and loss of business income. White Knight submitted a claim to Owners, and Owners paid policy proceeds in the amount of $66,366.27.

White Knight subsequently brought suit against Arango and Omervic for lost income during the time the restaurant was closed for repairs; Arango had an insurance policy with State Farm, with $50,000 policy limits, and Omervic had a policy issued by Progressive, with a with a $25,000.00 per occurrence limit. Before White Knight initiated litigation against the drivers, Owners sought to recoup payment of policy proceeds from State Farm and Progressive by sending a “Request for Payment” with instructions to “CONTACT OWNERS PRIOR TO SETTLEMENT.” State Farm made a payment to Owners in the amount of $33,668.14, which represented half of the policy payment to White Knight plus half of the $1,000 deductible; Progressive declined to pay. Owners told White Knight about its efforts to recoup policy proceeds from State Farm and Progressive, and White Knight did not object.

After paying Owners, State Farm sought a setoff in White Knight’s state court litigation against Arango, which the court denied. Ultimately, White Knight settled the state court action, receiving $25,000 from Omervic and $16,331.86 from Arango.

White Knight filed a complaint against Owners alleging a breach of contract and a breach of the implied covenant of good faith and fair dealing.

Missouri gives an insurance company, who pays a property damage claim, a subrogated interest in the insured’s rights against the third party who caused the property damage but does not provide the insurer with a direct right to pursue subrogation against the adverse party. Under Missouri law, an insurance company may not sue or formally settle with a tortfeasor or their insurer absent an assignment of the right to pursue that claim from the insured. White Knight contended that Owners’ conduct, in seeking direct repayment from State Farm and Progressive, violated Missouri subrogation law. The District Court, and Eighth Circuit, refused to find that it was illegal under Missouri law for Owners to informally seek reimbursement for policy proceeds paid, even though the subrogation efforts were premature.

The District Court also found that White Knight could not establish that it suffered damages as a result of Owners efforts to recoup policy proceeds, and therefore could not prevail on the breach of contract claim asserted. White Knight did not suffer damages, because the state court refused to give Arango a setoff for the payment made by State Farm to Owners. Specifically, the court found that nothing prevented White Knight from recovering the full policy amount in its claim against Arango. Moreover, White Knight would have only been able to keep what it recovered in the Arango litigation to the extent it could prove uninsured damages or damages in excess of Owners’ policy payment.

White Knight also contended that Owners violated its duty of good faith and fair dealing by asking State Farm for its pro rata share of policy proceeds paid by Owners. Missouri law implies a covenant of good faith and fair dealing in every contract; in the insurance context, a breach of the covenant of good faith occurs when the insurer acts in a manner as to evade the spirit of the transaction or in a manner that would deny the insured of the benefit of the agreement. The District Court granted summary judgment in favor of Owners, which the Eighth Circuit affirmed, for the same reasons that the breach of contract claim failed.

Missouri does not give an insurer a direct right to pursue its subrogation claims absent an assignment from the insured. However, State and Federal courts have refused to find that informal requests for repayment constitute a violation of Missouri subrogation law.

[1] White Knight’s litigation against Owners was originally pursued as part of a class action litigation, but the district court did not certify the class and dismissed all adverse parties other than Owners.

Venue and Selection of Registered Agents for Corporate Defendants

29 Sep 2023

ABSTRACT: The Missouri Supreme Court recently clarified that a non-Missouri plaintiff’s personal injury claim must be filed in the county of the corporation’s current, not past, registered agent. This ruling avoids the doubt and uncertainty that would arise if a plaintiff claimed that the injury occurred when the corporation held a registered agent in a potentially less favorable venue.

An August 15, 2023, Missouri Supreme Court decision, State ex rel. Monsanto v. Mullen, provides corporate defendants with more certainty and flexibility regarding the venue for lawsuits brought by out-of-state tort plaintiffs. Between 2017 and 2021, six plaintiffs had filed five independent tort claims alleging personal injuries from exposure to the Monsanto corporation’s herbicide Roundup. Those lawsuits were consolidated and set for a single trial. In the ongoing Monsanto Roundup litigation, the Court provided clarification of Missouri’s venue statute, Mo. Rev. Stat. § 508.010.5(1), in ruling on Monsanto’s writ of prohibition, which challenged the lower court’s ruling that the cases should be tried in the city of St. Louis. At the heart of the dispute was the question of whether, when a plaintiff is first injured outside of Missouri, venue in the Missouri courts is proper in the county where the defendant’s registered agent was based when the injury first occurred; or whether the case belongs in the county where the defendant’s registered agent is based at the time the lawsuit is filed. The Supreme Court ruled that the latter interpretation is correct.

The underlying cases were filed in the Circuit Court of the City of St. Louis and Monsanto sought a writ of prohibition following an unsuccessful attempt to have the cases transferred to St. Louis County. (For the uninitiated, state courts in the City of St. Louis are generally regarded as more hospitable to plaintiffs than the courts in St. Louis County.) All plaintiffs alleged being first injured outside the state of Missouri by exposure to the herbicide, at a time when Monsanto’s registered agent was based in the City of St. Louis. Plaintiffs argued, and the Circuit Court agreed, that because the injuries first occurred when Monsanto’s then-registered agent was located in the City of St. Louis, that is where venue properly belonged. Monsanto unsuccessfully argued that the location of its registered agent at the time the lawsuits were filed determined the proper venue.

After the circuit court rejected a motion by Monsanto to reconsider its ruling, Monsanto filed its writ of prohibition, seeking to have the venue ruling reversed. The Missouri Supreme Court entered a preliminary writ and agreed to hear the case.

In its ruling, the Supreme Court focused on the language of section 508.010(5), stating that where an injury first occurs out-of-state, “venue shall be in any county where a defendant corporation's registered agent is located.” The Court noted that venue is to be determined in Missouri strictly by statute, and the Court’s primary goal is to determine the statute’s legislative intent by review of the plain language. In reviewing the plain language of the statute, the Court held that the proper venue for a tort claim filed by a non-resident plaintiff against a corporate defendant is to be determined at the time of filing the lawsuit. It explained that use of the present tense is consistent with both Missouri and other jurisdictions’ statutes referencing the date of filing. The Supreme Court thus ordered that four of the five cases be transferred from the City of St. Louis to St. Louis County. (In the fifth case, Monsanto had failed to timely file a motion to have the case transferred.)

The Monsanto ruling underscores that the selection of a corporation’s registered agent is not merely a ministerial task and should not be taken lightly. The location of that agent’s office will be determinative as to venue for a corporate defendant defending an out-of-state plaintiff’s tort claim. After proper consideration and consultation with counsel, a corporation might strategize selection of the registered agent for the defense of future potential or anticipated litigation.