CORE MEDICAL, LLC (CORE LLC) VS. SCHROEDER (DEBORAH)
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RENDERED: JULY 23, 2010; 10:00 A.M.
NOT TO BE PUBLISHED
Commonwealth of Kentucky
Court of Appeals
NO. 2009-CA-000670-MR
CORE MEDICAL, LLC (CORE LLC)
v.
APPELLANT
APPEAL FROM KENTON CIRCUIT COURT
HONORABLE PATRICIA M. SUMME, JUDGE
ACTION NO. 07-CI-00220
DEBORAH SCHROEDER
APPELLEE
OPINION
AFFIRMING IN PART, REVERSING IN PART,
AND REMANDING
** ** ** ** **
BEFORE: DIXON AND VANMETER, JUDGES; LAMBERT,1 SENIOR
JUDGE.
DIXON, JUDGE: Appellant, Core Medical, LLC, appeals from a judgment of the
Kenton Circuit Court awarding damages to Appellee, Deborah Schroeder, on her
1
Senior Judge Joseph Lambert sitting as Special Judge by assignment of the Chief Justice
pursuant to Section 110(5)(b) of the Kentucky Constitution and Kentucky Revised Statute (KRS)
21.580.
claims of pregnancy discrimination in violation of KRS § 344.040 and Title VII,
42 U.S.C. §§ 2000(e), et seq. For the reasons set forth herein, we affirm in part,
reverse in part, and remand.
Schroeder was hired by Core Medical, Inc., D/B/A Commonwealth
MRI on August 23, 2004. She was assigned to the 340 Thomas More Parkway site
working four days a week from 7:30 a.m. until 4:00 p.m., an average of 32 hours
per week. In April 2005, Schroeder informed her manager, Rusty Skinner, that she
was pregnant and due to deliver in December 2005. Beginning in April 2005,
Schroeder repeatedly requested a definite statement as to her maternity leave from
both her on-site supervisor, Billy Styles, as well as Skinner.
In August 2005, Schroeder was informed that the 340 Thomas More
Parkway facility was closing and that she would be reassigned to her employer’s
MRI facility at 500 Thomas More Parkway, the current site of Core Medical LLC.
Following the transfer, Schroeder’s work schedule changed to the afternoon hours
of 2:00 p.m. until 10:00 p.m.
On August 23, 2005, Schroeder informed Core Medical, LLC that due
to her pregnancy, her OB/GYN had limited her to lifting no more than twenty-five
pounds and to a work schedule of twenty-four hours per week. Beginning the
following week, Schroeder was scheduled to work the 5:00 p.m. to 10:00 p.m. shift
by herself. Apparently, no employee had ever previously been required to work
alone. As a result, Schroeder expressed concern about not only the safety of
working by herself but also that it affected her lifting restrictions. In the months
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that followed, Schroeder’s shifts became very erratic, with her total weekly
schedule ranging anywhere from six hours to twenty-six hours, including various
shifts where she was still required to work alone, thus requiring her to do heavy
lifting.
On November 28, 2005, Skinner telephoned Schroeder at work to
discuss her maternity leave and schedule upon return to work. Styles also
participated in the conversation. Schroeder was informed that upon her return her
schedule would be increased to five days a week with the hours of 2:00 p.m. to
11:00 p.m. Schroeder later testified that when she asked Skinner and Styles if she
could discuss the new schedule with her husband because of child care issues, she
was summarily terminated and escorted from the premises.
On January 19, 2007, Schroeder filed a complaint in the Kenton
Circuit Court against Core Medical, Inc., d/b/a Commonwealth MRI, alleging
discrimination in violation of KRS 344.040, KRS 344.450, and Title VII, 42
U.S.C. §§ 2000(e), et seq. Appellant subsequently amended her complaint to
include Core Medical, LLC, Imatech, Inc. and Imatech.2 None of the defendants
responded to the suit and on July 26, 2007, the trial court entered a default
judgment against all defendants as to liability.
2
As no reference is made to Imatech in the trial court’s judgment, we are unable to discern what
its relationship is to Core Medical, Inc. or Core Medical, LLC. However, the trial court did note
that Kirk Bowman is registered as the President and person for service of process with the
Kentucky Secretary of State for Core Medical, Inc., D/B/A Commonwealth MRI, Core Medical,
Inc., Core Medical, LLC, IMATECH, Inc., and IMATECH.
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On October 21, 2008, the trial court conducted a bench trial on
damages. Core Medical, LLC was the only defendant represented during the trial.
On January 20, 2009, the trial court rendered a judgment awarding Schroeder back
pay of $28,942.20, compensatory damages of $125,000.00, and punitive damages
of $200,000.00. The trial court subsequently denied Core Medical, LLC’s motion
to alter, amend or vacate, and this appeal ensued. Additional facts are set forth as
necessary.
Core Medical, LLC first argues that there was no evidence presented
to support the trial court’s award of punitive damages. In the alternative, Core
Medical, LLC claims that even if this Court finds that punitive damages were
appropriate, the trial court’s award failed to comport with the statutory cap set
forth in 42 U.S.C. § 1981a(b)(3).
Our standard of review for a trial court’s findings of fact following a
bench trial is whether such findings are clearly erroneous. CR 52.01; OwensCorning Fiberglas Corp. v. Golightly, 976 S.W.2d 409, 414 (Ky. 1998). Findings
of fact are clearly erroneous if they are not supported by substantial evidence.
Moore v. Asente, 110 S.W.3d 336 (Ky. 2003). Substantial evidence is evidence of
a probative value that a reasonable person would accept as adequate to support a
conclusion. Even if this Court were to reach a contrary conclusion, we will not
disturb the lower court’s findings if supported by substantial evidence.
Notwithstanding, the trial court’s conclusions of law are subject to an independent
de novo review. Gosney v. Glenn, 163 S.W.3d 894 (Ky. App. 2005).
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A plaintiff asserting a federal gender discrimination and retaliation
cause of action is entitled to an award of punitive damages whenever he or she
proves that “the respondent engaged in a discriminatory practice or discriminatory
practices with malice or with reckless indifference to the federally protected rights
of an aggrieved individual.” 42 U.S.C. § 1981a(b)(1). The plaintiff does not need
to prove subjectively egregious behavior, but rather that the respondent
discriminated against the plaintiff “in the face of a perceived risk that its actions
[would] violate federal law . . . .” Kolstad v. American Dental Assoc., 527 U.S.
526, 536, 119 S.Ct. 2118, 114 L.Ed.2d 494 (1999). Further, a corporate entity is
liable for punitive damages occasioned by the misconduct of a managerial level
employee if the manager is acting in that capacity within the scope of his
employment. Id. at 543-45.
As it did in the lower court, Core Medical, LLC again argues that
because it was not in existence at the time of the discriminatory practice, it cannot
be liable for the acts of managers who were employed by its predecessor
corporation. We agree with Schroeder, however, that the default judgment
forecloses this argument on appeal. We would note that although there is a
pleading in the record indicating Core Medical, LLC’s intent to file a motion to set
aside the judgment, no such motion was ever filed.
Notwithstanding the procedural bar, we are of the opinion that the
evidence presented during the bench trial clearly refutes Core Medical, LLC’s
argument. The trial court made extensive findings on this issue:
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The defendant argues that Core Medical, LLC is a
separate entity from Core Medical, Inc., D/B/A
Commonwealth MRI because Core Medical, LLC merely
purchased the assets of Core Medical, Inc., D/B/A/
Commonwealth MRI. . . . The defendant Core Medical,
LLC, argues that it was not in existence at the time of the
plaintiff’s termination and never employed Rusty Skinner
the Plaintiff’s off-site manager.
...
It is uncontroverted that the plaintiff was employed by
Core Medical, Inc., D/B/A Commonwealth MRI. It is
uncontroverted that Core Medical, Inc., is a corporation
registered in Missouri. It is also uncontroverted that
Plaintiff filed her charge with the EEOC on or about
February 16, 2006, and received her right to sue notice
on or about October 23, 2006, and that this action was
filed on January 31, 2007. The pleadings and the
testimony also establish that Core Medical, LLC was
formed on March 31, 2006, and registered in Florida.
Additionally, the defendant Core Medical, LLC plead
and the court finds that the relationship between Core
Medical, Inc. and Core Medical, LLC was not finalized
until February or March of 2007. . . . The record is also
uncontroverted that Kirk Bowman is registered as the
President and person for service of process with the
Kentucky Secretary of State for Core Medical, Inc.,
D/B/A Commonwealth MRI, Core Medical, Inc., Core
Medical, LLC, IMATECH, Inc., and IMATECH.
In addition to the same assets, Core Medical, Inc. and
Core Medical, LLC operated at the same location, have
similar if not the same officers, have the same employees
and have the same on-site supervisor, Billy Styles. Most
importantly, both of these entities were notified prior to a
sale of assets or a sale as a successor corporation that the
plaintiff had filed an EEOC notice and were served with
summons to notify them of the suit filed on January 31,
2007. Billy Styles, who was on the phone and
instrumental in the termination of the plaintiff, is still
managing most of the same employees who worked for
Core Medical, Inc. There was no legal distinction
between these entities proven to the court. The court
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finds that the defendant Core Medical, LLC is a
successor in interest and/or owner of Core Medical, Inc.
As a panel of this Court in Parker v. Henry A. Petter Supply Co., 165 S.W.3d 474,
479 (Ky. App. 2005), noted, “a successor company which continues with the same
business, by the same officers and personnel, in the same location with only a
slight change in name will be considered liable for the debts and liabilities of the
selling company.” Thus, even if Core Medical, LLC were permitted to relitigate
the issue, it would fail on the merits.
The uncontroverted evidence demonstrated that Schroeder was
discharged in her eighth month of pregnancy without warning or cause. In light of
her unblemished work history, the evidence supported the trial court’s finding that
Core Medical, LLC engaged in a discriminatory practice with malice or with
reckless indifference to Schroeder’s federally protected rights. Accordingly, the
award of punitive damages was appropriate.
However, while we are of the opinion that the evidence supported an
award of punitive damages, we must agree with Core Medical, LLC that the trial
court erred in awarding $200,000.00 without any determination of the number of
employees that existed at the time of Schroeder’s termination or during the
preceding year. Punitive damages awards are limited by the provisions of 42
U.S.C. § 1981a(b)(3), which provides, in relevant part, as follows:
The sum of the amount of compensatory damages
awarded under this section for future pecuniary losses,
emotional pain, suffering, inconvenience, mental
anguish, loss of enjoyment of life, and other
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nonpecuniary losses, and the amount of punitive damages
awarded under this section, shall not exceed, for each
complaining party-(A) in the case of a respondent who has more than 14 and
fewer than 101 employees in each of 20 or more calendar
weeks in the current or preceding calendar year, $50,000;
(B) in the case of a respondent who has more than 100
and fewer than 201 employees in each of 20 or more
calendar weeks in the current or preceding calendar year,
$100,000; and
(C) in the case of a respondent who has more than 200
and fewer than 501 employees in each of 20 or more
calendar weeks in the current or preceding calendar year,
$200,000; and
(D) in the case of a respondent who has more than 500
employees in each of 20 or more calendar weeks in the
current or preceding calendar year, $300,000.
Schroeder responds that the damages cap contained in § 1981a(b)(3)
is an affirmative defense that would “constitute an avoidance” under CR 8.03.
Relying upon Ingraham v. United States, 808 F.2d 1075, 1079 (5th Cir. 1987),
Schroeder asserts that Core Medical’s failure to plead the statutory cap constitutes
a waiver of the affirmative defense, precluding it from challenging the amount of
punitive damages at this point. We disagree.
Whether the limitation provision of § 1981a(b)(3) functions as an
affirmative defense is not only an issue of first impression in Kentucky, but has, in
fact, been discussed by very few courts. However, we are persuaded by the
reasoning set forth in Oliver v. Cole Gift Ctrs., 85 F.Supp.2d 109 (D. Conn. 2000),
wherein the court held:
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Plaintiff fails to cite any case law on the issue of whether
Title VII's statutory cap must be pleaded as an
affirmative defense. Rather, Plaintiff relies on cases in
which the courts held that the defendants waived various
statutory limitations other than § 1981a(b)(3) by failing
to plead the limitations as affirmative defenses.
Plaintiff's reliance on these cases is misplaced. In each
of the cases Plaintiff cited, the limitations on damages
were part of a statutory scheme distinct from the basis of
recovery. The courts in those cases held that the caps
were affirmative defenses in order to prevent unfair
surprise because the caps were not evident on the face of
the statutory schemes under which the plaintiffs had
brought their claims. See, e.g., Ingraham v. United
States, 808 F.2d 1075 (5th Cir. 1987) (defendant sought to
apply Texas's statutory limitations on medical
malpractice damages to reduce plaintiff's recovery under
the Federal Tort Claims Act); . . . .
By contrast, [Title VII’s] statutory cap is evident
on the face of the statute as a Congressional limitation on
the court's power to award damages to a Title VII
plaintiff. See Bereda v. Pickering Creek Indus. Park,
Inc., 865 F.2d 49, 54 (3rd Cir. 1989) (construing Title
VII's provision limiting back pay liability). No plaintiff
claiming damages under Title VII can complain of unfair
surprise, prejudice, or lack of opportunity to respond
when confronted with the [statutory] limitation of
damages, because the limitation is part of the same
statutory scheme under which the plaintiff has brought
his or her claim.
The Supreme Court noted that “[i]t was not until
1991 that Congress made damages available under Title
VII, and even then, Congress carefully limited the
amount recoverable in any individual case, calibrating
the maximum recovery to the size of the employer.”
Gebser v. Lago Vista Indep. Sch. Dist., 524 U.S. 274,
286, 118 S.Ct. 1989, 1997, 141 L.Ed.2d 277 (1998).
More recently, the Court referred to the cap as one
example of “certain conditions and exceptions” set forth
in [Title VII]. West v. Gibson, 527 U.S. 212, ----, 119
S.Ct. 1906, 1909, 144 L.Ed.2d 196 (1999). However, the
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Court has never referred to a requirement that the cap be
pleaded as an affirmative defense or avoidance.
Similarly, the Second Circuit has not referred to Title
VII's statutory cap as an affirmative defense. See
Luciano v. Olsten Corp., 110 F.3d 210, 221 (2d Cir.1997)
(“[I]f the sum of the compensatory and punitive damages
awarded by the jury exceeds the relevant cap, the district
court reduces the award to ensure that it conforms with
subsection (b)(3); that is, that it ‘[does] not exceed’ the
relevant cap for an employer of the defendant's size.”)
(quoting Hogan v. Bangor & Aroostook R.R. Co., 61 F.3d
1034, 1037 (1st Cir. 1995)).
For the reasons set out above, we hold that the statutory
cap set out in § 1981a(b)(3) is not an affirmative defense
and is not waivable.
Oliver, 85 F.Supp.2d at 111-12. See also Giles v. General Elec. Co., 245 F.3d 474
(5th Cir. 2001).
Similarly, central to Kentucky’s CR 8.03 requirement of pleading
affirmative defenses is the prevention of unfair surprise or prejudice. See
generally First Nat’l Bank of Grayson v. Citizens Deposit Bank & Trust, 735
S.W.2d 328 (Ky. App. 1987). However, as the Oliver court noted, a plaintiff
claiming damages under Title VII cannot complain of unfair surprise, prejudice, or
lack of opportunity to respond when confronted with the statutory limitation of
damages, because such limitation is plainly part of the same statutory scheme
under which the plaintiff has brought his or her claim. Accordingly, we conclude
that Core Medical, LLC was not required to affirmatively plead the § 1981a(b)(3)
statutory cap and did not waive its applicability herein.
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Clearly, there remains a factual issue as to the number of Core
Medical, LLC employees in the current or preceding calendar year. Schroeder
states in her brief that Core Medical, LLC has locations throughout the country,
while Core Medical, LLC maintains that it only employs forty-eight workers.
Nevertheless, it is evident from the trial court’s final judgment that it did not
consider § 1981a(b)(3) in determining the amount of punitive damages, nor did it
make any finding as to the number of Core Medical, LLC employees. As such, the
matter must be remanded for further proceedings as to the amount of punitive
damages.
Core Medical, LLC next argues that the $125,000.00 compensatory
damage award is excessive and not supported by the evidence. Buttressing its
position, Core Medical, LLC observes that Schroeder did not seek any medical
treatment, was able to return to work in early March 2006, and found a full-time
position as a radiation technologist in October 2006. Further, Core Medical
maintains that a significant portion of the compensatory damage award related to
emotional distress Schroeder suffered as a result of the litigation, which is noncompensable. See Flowers v. First Hawaiian Bank, 295 F.Supp.2d 1130 (D.C.
Haw. 2003).
KRS 344.450 specifies that any person injured by any act in violation
of the Kentucky Civil Rights Act “shall have a civil cause of action in circuit
court . . . to recover the actual damages sustained by him.” Actual damages
include emotional distress, mental anguish, humiliation and personal indignity.
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Meyers v. Chapman Printing Co., Inc., 840 S.W.2d 814, 819 (Ky. 1992). See also
McNeal v. Armour & Co., 660 S.W.2d 957, 958-59 (Ky. App. 1983).
The trial court made the following findings with respect to
Schroeder’s claim of emotional distress:
The court found in its default judgment and in this
final judgment that the plaintiff was fired without
warning or cause. In addition, the uncontroverted
evidence was that this dismissal occurred in the presence
of other employees and not at the end of the work day so
that she had to gather her things and leave in front of the
other employees. Plaintiff testified that this caused her
embarrassment and humiliation. She also testified that
the suddenness of the situation caused stress and anguish
not only because of the manner of termination but
because of the financial hardship it caused. She was a
pregnant woman just several weeks pre-delivery and not
only was she not in a condition to seek employment her
condition made her chances of finding new employment
slim if non-existent.
The plaintiff, Kenny Schroeder, her husband, Mary
Jo Hardcorn, her mother and Shauna Vogelpohl, her
neighbor, presented testimony of the emotional effect
termination had upon the plaintiff. Plaintiff indicated the
fact that the termination was targeted toward her
pregnancy was devastating to her. She testified that she
believed this condition (pregnancy) was protected from
economic retaliation by society and that her core beliefs
were [shaken] to find out that pregnancy was not
protected by her employer. The testimony revealed that
prior to the termination the plaintiff was outgoing,
energetic and full of joy about the new child to be born.
All of the plaintiff’s witnesses testified that as a result of
the termination the joy of the birth of the child was
dramatically overshadowed by the plaintiff’s depression,
bouts of crying, loss of energy and withdrawal. The
testimony indicated that the plaintiff spent more time in
bed and did not complete the daily and ordinary tasks in
the home. . . . Plaintiff testified that some of the residual
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emotions from the termination continue in the form of
fear of dismissal if she should conceive again.
...
The court finds that the plaintiff’s emotional distress,
including humiliation of dismissal, the anxiety, stress and
personal indignity, was primarily caused by her
termination. The court finds that any “litigation” anxiety
and distress is secondary and was caused by the primary
act of discrimination and thus is directly related.
Marchisotto v. City of New York, 2007 WL 1098697
(2007). The Court also finds that the presentation of
expert testimony or the requirement that the plaintiff
sought professional help for the emotional distress is not
required by law.
As previously noted, the trial court’s findings of fact are reviewed
under the clearly erroneous standard. Owens-Corning Fiberglas Corp., 976 S.W.
2d at 414. The trial court, having heard the evidence and observed the witnesses,
found that Schroeder proved by substantial evidence that she suffered emotional
distress as a result of Core Medical, LLC’s discriminatory conduct. Unless the
verdict bears no relationship to the evidence, it should not be set aside. The
assessment of damages is a matter left in the hands of the trial court, and its
decision should be disturbed only in the most egregious circumstances. Childers
Oil Co., Inc. v. Adkins, 256 S.W.3d 19, 28 (Ky. 2008). Bases upon the evidence as
a whole, we simply cannot conclude that such circumstances exist. The trial court
did not err in its award of compensatory damages.
The judgment of the Kenton Circuit Court is affirmed in part, and
reversed in part. The matter is remanded for further proceedings to determine the
appropriate award of punitive damages in light of 42 U.S.C. §1981a(b)(3).
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ALL CONCUR.
BRIEF FOR APPELLANT:
BRIEF FOR APPELLEE:
Mark J. Byrne
Douglas M. Morehart
Cincinnati, Ohio
Michael J. O’Hara
Suzanne Cassidy
Covington, Kentucky
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