BANK ONE, KENTUCKY, N.A. V. SHARLENE MURPHY
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RENDERED: AUGUST 23,200l
TO BE PUBLISHED
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2000-SC-0229-DG
BANK ONE, KENTUCKY, N.A.
ON REVIEW FROM THE COURT OF APPEALS
NO. 1998-CA-2168-MR
JEFFERSON CIRCUIT COURT NO. 96-Cl-4671
V.
SHARLENE
MURPHY
APPELLEE
OPINION OF THE COURT BY CHIEF JUSTICE LAMBERT
AFFIRMING IN PART, REVERSING IN PART. AND REMANDING
This Court granted discretionary review to consider whether an employer
defending a sexual harassment lawsuit is entitled to prevail on an affirmative defense
that it has made significant efforts to correct and prevent sexual harassment in the
workplace. To resolve this issue in the context of the instant case, it is necessary to
determine whether the employer’s conduct with regard to prior harassing conduct by the
alleged harasser against an employee other than the plaintiff creates a genuine issue of
material fact as to the reasonableness of the employer’s efforts to correct and prevent
the sexual harassment. A second and subsidiary issue is whether an employer
commits an impermissible retaliatory act under the Kentucky Civil Rights Act by filing a
declaratory judgment action before a potential plaintiff files a lawsuit and while
settlement negotiations are ostensibly ongoing.
Sharlene Murphy, Appellee herein, began working for Bank One’s
predecessor, Liberty National Bank, as a secretary on November 11, 1994. Both
Liberty National Bank and Bank One gave Murphy a copy of their policies prohibiting
sexual harassment. Bank One’s policy provides:
Employees who experience a situation they consider to have
been sexual harassment should contact their supervisor
immediately . . . You may take your complaint of sexual
harassment to the Human Resources Office if your
supervisor is the subject of your complaint of sexual
harassment, or if you prefer to report your complaint directly
to Human Resources, for whatever reason.
Bank One’s Code of Ethics, which governs all Bank One employees, states:
You should report incidents of sexual or other harassment
as soon as possible to you personnel director, employee
relations area, or other senior officer within Bane One.
Murphy admits that she received copies of both Liberty National Bank One’s written
policies forbidding sexual harassment and specifying the procedures for reporting
alleged sexual harassment.
In October 1995, Murphy began working in the Facilities Management
area of the bank under the supervision of Vivian Korphage. In January 1996, she came
under the direct supervision of William Gaunt, the alleged perpetrator of the sexual
harassment. Gaunt was a bank officer responsible for managing the bank’s real estate
properties.
The facts giving rise to this lawsuit are hotly disputed by the parties, and
thus the following text merely represents an effort to lay open the crucial incidents at
issue and not to resolve them one way or the other. At trial, all relevant evidence will be
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before the jury for its use in determining whether Murphy was a victim of sexual
harassment. According to Murphy’s deposition testimony, soon after Murphy began
working under Gaunt, she went to his office to discuss problems she was having with a
co-worker. During this conversation, Gaunt reached out and held Murphy’s hand. She
did not perceive this conduct as offensive at the time, believing only that he was being
supportive of her. In late January or early February 1996, she initiated a hug with
Gaunt in response to a compliment he had paid her.
Around the end of February 1996, Gaunt made comments to Murphy
about Korphage’s sex life and stated that Korphage had slept her way to the top. At the
end of March 1996, Gaunt kissed Murphy on the lips for the first time. By this time,
Gaunt had instituted a daily routine of hugging. During one of these daily hugs, Gaunt
kissed Murphy and told her that she was the best thing that had happened to him, and
that between her and another co-worker, Murphy was the cream of the crop. When
Murphy expressed her discomfort, Gaunt told her that it was better to be kissing cousins
than enemies.
According to Murphy, Gaunt’s behavior remained the same after the first
kissing episode. Along with the daily hug, there was inappropriate touching during the
hugs, sexually explicit remarks by Gaunt, and several more kissing incidents. While
Murphy tried to avoid Gaunt in an effort to evade the daily hug routine, she never
refused his requests for hugs nor did she report the incidents or make any complaint.
Murphy contends that she did not perceive Gaunt’s behavior as sexual
harassment until the first kissing incident at the end of March 1996. Gaunt’s allegedly
offensive conduct continued for three more months, until June 1996. According to
Murphy’s deposition testimony, she did not report the alleged harassment immediately
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because she wanted to try to handle the situation herself. Yet, on June 19, 1996,
Murphy told Korphage about Gaunt’s behavior. Korphage told Murphy that she likewise
had been sexually harassed by Gaunt, and she wished she had handled the matter
differently. Korphage encouraged Murphy to go directly to Human Resources and
report Gaunt.
Murphy reported the alleged harassment to Joyce Tingle in the bank’s
Human Resources Department that same day. According to Tingle’s deposition
testimony, the bank investigated Murphy’s allegations immediately. Murphy was
allowed a paid leave of absence during the investigation, because she had stated that
she was upset and nervous about encountering Gaunt after having lodged her
complaint. Seven business days after the report, on Friday, June 28, 1996, 31-yearemployee Gaunt resigned in lieu of termination for failing to comply with the bank’s
Code of Ethics.’ Murphy acknowledged that she was never again subjected to
harassment by Gaunt or any other bank employee.
Murphy returned to work on July 1, 1996, but took medical leave from July
16, 1996 until October 9, 1996. Murphy again left on medical leave from October 22,
1996 until January 30, 1997, at which time she tendered her resignation.
Despite the bank’s rapid response to Murphy’s report and the absence of
any adverse tangible employment action taken against her, on July 15, 1996, by
counsel she demanded $250,000 from the bank. On August 6, 1996, she and her
‘Bank One did not conclude that Gaunt had in fact engaged in sexual
harassment within the meaning of KRS 344.040. Rather, it concluded that, based upon
uncontested evidence, including Gaunt’s admission that he had engaged in consensual
hugs and kisses with an administrative assistant, Gaunt’s conduct violated the Code of
Ethics for bank officers.
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counsel met with the bank’s counsel and threatened to file a sexual harassment lawsuit
absent a satisfactory monetary settlement. The essence of her complaint was that the
bank had failed to take appropriate action in 1995 when Korphage reported Gaunt for
sexually inappropriate behavior. At that time, Korphage had refused to file a formal
complaint against Gaunt and had asked to remain anonymous. Korphage also had
refused to cooperate with any investigation into Gaunt’s alleged misconduct and had
stated that she did not want any adverse action taken against him. Korphage only
reported Gaunt’s allegedly inappropriate conduct because a new supervisory position
was opening at the bank, and she did not want to supervise Gaunt or vice versa.
At the time of the Korphage report, the bank consulted outside counsel,
who advised that, in consideration of the nature of the allegations and Korphage’s
refusal to cooperate further, the bank should inform Gaunt of the allegations, give him a
copy of the bank’s sexual harassment policy, and inform him that the policy would be
enforced. According to the affidavit of Gaunt’s supervisor, Gilbert Darnell, the bank
informed Gaunt that a female employee had expressed concern about the propriety of
his behavior. The importance of the bank’s anti-harassment policy was emphasized,
and Gaunt was given another copy of the policy and instructed to read it. The bank told
Gaunt that its anti-harassment policy would be strictly enforced and that any violation
would be addressed with appropriate disciplinary action, up to and including dismissal.
Korphage had no further problems with Gaunt, but later told her story in support of
Murphy.
On August 9, 1996, the bank filed a declaratory judgment action in the
United States District Court for the Western District of Kentucky, seeking a declaration
of rights with respect to the propriety of the bank’s actions under Burlinaton Industries,
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Inc. v. Ellerth2 and Faraaher v. Citv of Boca Raton According to these cases,
employers who take reasonable measures to protect employees against sexual
harassment are provided an affirmative defense. The bank did not seek money
damages and it expressly disavowed any claim for attorney fees in conjunction with its
claim.
Murphy countered, within only a few hours, by filing this sexual harassment
lawsuit in Jefferson Circuit Court, to which forum the federal court ultimately deferred.
The trial court granted summary judgment in favor of the bank. The trial court also
denied Murphy’s motion to amend her complaint to allege that the bank and its
attorneys had engaged in retaliatory conduct in violation of KRS 344.280 by filing the
federal declaratory judgment action. A split Court of Appeals panel reversed and
remanded for further proceedings.
The bank now contends that it was properly entitled to an affirmative
defense because it had taken reasonable measures to prevent and correct sexual
harassment such as that alleged by Murphy. This affirmative defense was approved by
the United States Supreme Court in Burlinaton Industries. Inc. v. Ellerth4 and Faraoher
v. Citv of Boca Raton, where the two elements of the defense were described as
follows:
When no tangible employment action is taken, a defending
employer may raise an affirmative defense to liability or
damages . . . The defense comprises two necessary
elements: (a) that the employer exercised reasonable cafe
to prevent and correct promptly any sexually harassing
2524 U.S. 742, 118 S.Ct. 2257, 141 L.Ed.2d 633 (1998).
3524 U.S. 775, 118 S.Ct. 2275, 141 L.Ed.2d 662 (1998).
4524 U.S. 742 (1998).
5524 U.S. 775 (1998).
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behavior; and (b) that the plaintiff employee unreasonably
failed to take advantage of any preventive or corrective
opportunities provided by the employer or to avoid harm
otherwise.6
(emphasis added). In these cases, the United States Supreme Court discussed the
type of proof required for an employer to establish the affirmative defense, stating,
While proof that an employer has promulgated an antiharassment policy with complaint procedure is not
necessary in every instance as a matter of law the need for
a stated policy suitable to the employment circumstance
may appropriately be addressed in any case when litigating
the first element of the defense. And while proof that an
employee failed to fulfill the corresponding obligation of
reasonable care to avoid harm is not limited to showing any
unreasonable failure to use any complaint procedure
provided by the employer, a demonstration of such failure
will normally suffice to satisfy the employer’s burden under
the second element of the defense.’
This Court interprets KRS 344.040 in consonance with federal anti-discrimination law.8
Thus, the Ellerth/Faraqher affirmative defense is available to employers facing vicarious
liability for sexual harassment under KRS 344.040.’
The bank contends that both elements of the Ellerth/Faraaher affirmative
defense were established by unrebutted CR 56 evidence. The bank maintains that it
met the requirements of the first element, which focuses on the employer’s conduct,
‘Ellerth, 524 U.S. at 765; Faraaher, 524 U.S. at 807.
8Mevers v. Chapman Printing, Ky., 840 S.W.2d 814, 821 (1992);
Ammerman v. Board of Education of Nicholas Countv. Kentucky, Ky., 30 S.W.3d 793,
797 (2000).
gEllerth, 141 L.Ed.2d at 655; Faraaher 141 L.Ed.2d at 689 (an “employer
is subject to vicarious liability to a victimized employee for an actionable hostile
environment created by a supervisor with immediate (or successively higher) authority
over the employee”).
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because it implemented an anti-harassment policy, provided every employee a copy of
the policy, and made reasonable efforts to train all employees regarding such policy.
Murphy admitted in her deposition testimony that she was aware of the policy and of
her obligation to report any improper activities. Also, the bank maintains that it
exercised reasonable care to prevent and promptly correct the alleged harassment. It
immediately investigated Murphy’s complaint and within seven business days caused
Gaunt, an employee of thirty-one years, to submit his resignation in lieu of termination.
Murphy admitted that she was not subjected to any further sexual harassment from
Gaunt or any other bank employee following Gaunt’s forced resignation.
Murphy contends, however, that the bank was aware of Gaunt’s
propensity to engage in sexually harassing conduct by virtue of the alleged incident
involving Korphage about three years earlier and that the bank failed to take proper
corrective action at that time, thereby exposing Murphy to a continuation of such
conduct. Murphy relies on Kim Hirase-Doi v. U.S. Communications. Inc.” for the
proposition that an employer may be put on notice of an employee’s sexual harassing
conduct “if [the employer] learns that the perpetrator has practiced widespread sexual
harassment in the office place, even though [the employer] may not have known that
this particular plaintiff was one of the perpetrator’s victims.“” We accept this view from
the Kim Hirase-Doi case as a proper statement of Kentucky law, and that brings us to
the heart of the matter.
For purposes of this analysis and to determine whether there is an issue
of fact sufficient to withstand summary judgment, we take it as true that acts of
“61 F.3d 777 (10th Cir. 1995).
“ld. at 783.
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harassment were committed by Gaunt against Korphage. We also accept as true that
Korphage reported the acts to proper human resources personnel, but instructed them
to refrain from using her name and insisted that she would not co-operate in an
investigation. The bank insists that its representative confronted Gaunt with the
Korphage allegations, albeit without identifying Korphage out of respect for her request,
and furnished Gaunt with a copy of the bank’s anti-sexual harassment procedures and
demanded his obedience thereto. An affidavit to this effect is of record. When Gaunt
testified by deposition, however, he denied having been confronted with the facts of the
Korphage incident by name, and the bank concedes as much. Notably, however, in his
deposition Gaunt was not asked whether he had been apprized generally of such a
complaint without disclosure of the identity of the complainant, or the details of the
allegations. In other words, Gaunt denied knowledge of the Korphage allegations, yet
he was not asked whether he had been informed in more general terms about those
allegations against him. Thus, the evidence does not converge in a manner that
permits a confident answer to this critical question. The record is simply incomplete as
to whether the bank confronted Gaunt with the details of the Korphage allegations; and,
if such was brought to his attention, whether it did so in a reasonable manner to prevent
and correct the misconduct.
A party moving for summary judgment bears the burden of demonstrating
entitlement to such relief.‘* When the record is incomplete and the Court would be
required to draw inferences or find facts, summary judgment is inappropriate. This
Court has long applied a stringent standard to motions for summary judgment, stating
‘*See, e.g., Hubble v. Johnson, Ky., 841 S.W.2d 169, 171 (1992).
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that the motion should not be granted unless it appears to be “impossible” for the nonmoving party to prevail at trial.13 Our recent decision in Roethke v. Pan American Life14
is illustrative of our view.
While the bank’s response to the Murphy incident appears unassailable,
we believe an issue of fact has been presented with respect to whether the bank
confronted Gaunt with the essential facts related by Korphage and properly demanded
corrective action. A resolution of this factual dispute is necessary to determine whether
the bank exercised reasonable care to prevent sexual harassment. An answer to these
questions will answer the comprehensive question of whether the bank has satisfied its
burden under the Ellerth/Faraaher
test.”
A separate issue is whether the bank violated KRS 344.280 when it filed a
declaratory judgment action in the U.S. District Court seeking a determination that it
was entitled to prevail on its affirmative defenses under the Ellerth and Faraaher cases.
Prior to the commencement of litigation, counsel for Murphy contacted the bank and
notified it of the claim. Counsel for the bank invited a settlement offer and such an offer
was tendered. Thereafter, the parties and counsel met for a negotiating session at
which Murphy was interrogated by counsel for the bank. A few days after the meeting,
and while settlement negotiations were apparently ongoing, the bank filed suit in federal
13Steelvest.
Inc. v. Scan Steel Service Center. Inc., Ky., 807 S.W.2d 476
(1991).
14Ky., 30 S.W.3d 128, 133 (2000).
“Our failure to address the second prong of the Ellerth/Faraaher test, i.e.
whether the plaintiff/employee unreasonably failed to take advantage of any
preventative or corrective opportunities, should not be regarded as a resolution of this
issue in Murphy’s favor. If the bank chooses, it may contest this issue at trial. Our
determination that an issue of fact exists with respect to the first prong of the test
renders further elaboration unnecessary.
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seeking a declaration of rights on its affirmative defense. The complaint sought only a
declaration of rights; it sought no damages or attorneys’ fees whatsoever.
Murphy contends that filing a suit while settlement negotiations were
ongoing amounts to a violation of KRS 344.280 and is retaliatory in nature. We
disagree. While it may amount to bad manners or may appear to some to be
unprofessional, such conduct does not constitute a violation of the statute nor is it
tortious. Declaratory judgment actions are widely utilized to establish certain
fundamental rights in ongoing disputes. KRS 418.045 contains an extensive list of
subjects and transactions upon which declaratory relief is available. It would be unwise
for this Court to introduce limitations upon the rights of parties to seek declaratory relief.
Accordingly, the trial court’s denial of Murphy’s motion to amend her complaint to add a
retaliation claim was proper.
Based upon the foregoing reasons, the decision of the Court of Appeals is
affirmed in part and reversed in part, and this action is remanded to the trial court for
further consistent proceedings.
Cooper, Graves, Johnstone, and Wintersheimer, JJ., concur. Keller, J.,
files a separate opinion concurring in part and dissenting in part, in which Stumbo, J.,
joins.
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COUNSEL FOR APPELLANT:
John W. Zeiger
Jeffrey A. Lipps
ZEIGER & CARPENTER
41 South High Street, Suite 1600
Columbus, OH 43215
Dorothy M. Pitt
PITT, FENTON & SMITH
6000 Brownsboro Park Blvd.
Louisville, KY 40207
Victor B. Maddox
Dustin E. Meek
TACHAU MADDOX HOVIOUS & DICKENS PLC
200 South Fifth Street, Suite 200 North
Louisville, KY 40202
COUNSEL FOR APPELLEE:
Thomas E. Clay
THOMAS E. CLAY, PSC
Kentucky Home Life Building
239 South Fifth Street, Suite 2000
Louisville, KY 40202
Sean Ragland
BOLUS & RAGLAND
Kentucky Home Life Building
239 South Fifth Street, Suite 2000
Louisville, KY 40202
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RENDERED: AUGUST 23,200l
TO BE PUBLISHED
2000-SC-0229-DG
BANK ONE, KENTUCKY, N.A.
APPELLANT
ON REVIEW FROM THE COURT OF APPEALS
NO. 1998-CA-2168-MR
JEFFERSON CIRCUIT COURT NO. 96-Cl-4671
V.
SHARLENE MURPHY
APPELLEE
OPINION BY JUSTICE KELLER
CONCURRING IN PART AND DISSENTING IN PART
I agree with the majority that the trial court erred when it granted summary
judgment in favor of Bank One as to Murphy’s KRS 344.040 sexual harassment claim.
.
I write separately, however, because I agree with the Court of Appeals that the trial
court abused its discretion when it denied Murphy’s motions to amend her complaint to
allege KRS 344.280(l) retaliation claims connected with Bank One’s decision to
interrupt the settlement negotiations and bring a declaratory judgment action in federal
court. Although this Court has addressed interpretive issues concerning KRS
344.280(l)
only once before’ (and then merely in passing), the majority devotes only
two (2) paragraphs to this issue and cites no meaningful authority in support of its
conclusion that “such conduct does not constitute a violation of the statute nor is it
‘See Palmer v. Intern. Ass’n of Machinists, Ky., 882 S.W.2d 117, 120 (1994).
tortious.”
Upon remand, I would require the trial court to allow Murphy to amend her
complaint to include these claims. Although I recognize that Murphy may not be able to
prove that a retaliatory motive prompted Bank One to file a declaratory judgment action
in federal court, and, as such, Murphy may not prevail at trial - or perhaps even
survive summary judgment - Murphy’s amended complaint raises a claim upon which
the trial court could grant relief, and the trial court abused its discretion when it denied
Murphy’s motion to amend her complaint.
The Kentucky Civil Rights Act creates a cause of action for, among other acts,
retaliation against employees who have asserted claims under the Act:
It shall be an unlawful practice for a person, or for two (2)
or more persons to conspire:
(1) To retaliate or discriminate in any manner against a
person because he has opposed a practice declared
unlawful by this chapter, or because he has made a charge,
filed a complaint, testified, assisted, or participated in any
manner in any investigation, proceeding, or hearing under
this chapter . . . .2
Count III of Murphy’s Amended Verified Complaint set out a retaliation claim
under KRS 344.280(l):
26.
27.
On or about June 19, 1996, the Plaintiff informed
Defendant Bank One through one of its employees of
the above described conduct of Defendant Gaunt.
Plaintiff was asked if she wanted to leave work during
the pending investigation and then told to “kick back
*KRS 344.280(l). See also KRS 344.450 (“Any person injured by any act in
violation of the provision of this chapter shall have a civil cause of action in Circuit Court
to enjoin further violations, and to recover the actual damages sustained, together with
the costs of the lawsuit. . . . ” Id.). I would note that KRS 344.280(l) offers protection
from retaliation to any person while KRS 344.040 affords protection from discrimination
only to those in an employer-employee relationship. Admittedly, in most cases, alleged
acts of retaliation occur in an employment context, and existing caselaw tends to
characterize retaliation in that context. KRS 344.280(l), however, covers a broader
range of retaliatory acts. See infra note 18 and surrounding text.
28.
29.
30.
31.
32.
33.
34.
35.
and relax and enjoy her paid vacation” by an
employee of Defendant Bank One.
Plaintiff contacted and retained attorney, Thomas E.
Clay. Attorney Clay informed Bank One of his
representation of Plaintiff.
An employee of Bank One requested that attorney
Clay make a demand to resolve Plaintiffs claim.
Attorney Clay complied.
In response to attorney Clay’s demand, Defendant
Bank One, requested a meeting with attorney Clay
and Plaintiff. Again, attorney Clay and Plaintiff
complied.
On August 6, 1996, attorney Clay, attorney Mayfield
and Plaintiff met with Bank One’s attorneys, John
Zeiger and Jeffrey Lipps. During this meeting, Bank
One’s attorneys discussed the law with attorney Clay
and then extensively questioned Plaintiff. At the
conclusion of this meeting, Bank One’s attorneys
requested time to contemplate the information that
they had obtained in this meeting and then respond to
attorney Clay’s demand. A date and time was set for
the following Monday, August 12, 1996 at 9:30 a.m.,
for a telephonic conference in which Bank One, via its
attorneys, would respond to attorney Clay’s demand.
Instead, however, on Friday, August 9, 1996, Bank
One filed in Federal Court and had served on Plaintiff
its Declaratory Judgment action.
The above described conduct is retaliatory in nature
and in violation of KRS 344.280(l).
As a direct and proximate cause of Defendant’s
conduct, the Plaintiff has sustained severe emotional
distress, humiliation and embarrassment.
The amount to compensate for her injuries involved
exceed the jurisdictional limits of this Court.
The trial court interpreted Murphy’s claim as alleging a cause of action against
only Bank One’s attorneys and denied the motion:
Plaintiff tenders a new Count III which names defense
counsel as defendants to this action. Specifically, Plaintiff
alleges that defense counsel’s filing of a Declaratory
Judgment Complaint constitutes retaliatory employment
discrimination in violation of KRS 344.280.
CR 15.01 allows a party to amend a pleading once as a
matter of course any time before a responsive pleading is
filed. Thereafter, a party may amend his pleading only by
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leave of court or written consent of the adverse party.
“[l-leave shall be freely given when justice so requires.” CR
15.01. However, the court may deny a motion to amend
when the proposed amendment fails to state a claim upon
which relief can be granted. First National Bank of
Cincinnati v. Hartmann, Ky.App., 747 S.W.2d 614, 616
(1988).
The purpose of the Kentucky Civil Rights Act is “to provide
for execution within the state of the policies embodied in the
Federal Civil Rights Act of 1964 as amended.” KRS
344.020. Therefore, Kentucky courts look to federal case
law for guidance regarding issues of sex discrimination. In
the case of Mountain Clav. Inc. v. Commission on Human
Rights, Ky.App., 830 S.W.2d 395 (1992), the Kentucky Court
of Appeals used federal case law to determine whether
Mountain Clay filed a retaliatory action pursuant to KRS
344.280(l).
Under federal law, in order to prove a prima
facie case of retaliation under Title VII of the
Civil Rights Act of 1964, the employee must
establish that:
(1) he was engaged in opposition to practices
made unlawful by Title VII or was a participant
in the Title VII proceeding
(2) his activity was protected
(3) he was subjected to adverse treatment by
the employer or labor union, and
(4) there was a causal connection between his
opposition or participation and the retaliation.
Mountain Clay, 830 S.W.2d at 396.
In the case at bar, defense counsel, Mr. Lipps and Mr.
Zeigler, are clearly not Plaintiffs employers. Rather, Bank
One hired these gentlemen to defend this action. If Plaintiff
has any viable claim of retaliation regarding the filing of the
Declaratory Judgment Complaint, it is against Plaintiffs
employer, Bank One, not the attorneys who filed the claim.
IT’IS FURTHER ORDERED that Plaintiffs motion to file a
verified amended complaint is DENIED as to Count III.
Murphy subsequently filed another motion containing an identical Count III and
asked the trial court to allow her to amend her complaint to allege a retaliation claim
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against Bank One itself. The trial court denied the motion after concluding that the
Kentucky Rules of Evidence prevented Murphy from proving the material allegations of
her retaliation claim and that, in any event, Murphy had failed to state a claim upon
which relief could be granted:
This matter comes before the Court on the Plaintiffs
motion to Amend Verified Complaint. In the Amended
Complaint, Plaintiff seeks to add three new counts. Count Ill
contains an allegation that the Defendant Bank One’s
conduct in filing a Declaratory Judgment action in federal
court constitutes retaliation. . . .
The Court first addresses Count Ill. In part, the opposition
is based on the language in an Order of this Court dated
December 31, 1996. Said order concerned another motion
to amend the Complaint in which plaintiff sought to add an
allegation of retaliation against two attorneys for Bank One.
In denying the motion as to that Count of the Complaint, the
Court stated that “[i]f the Plaintiff has any viable claim of
retaliation regarding the filing of the Declaratory Judgment
Complaint, it is against Plaintiffs employer, Bank One, not
the attorneys who filed the claim.”
Upon further reflection the Court is not certain that this
statement is correct. This conclusion is based on two
reasons. First, the Court is mindful of the fact that the
Plaintiff will not be able to introduce evidence of the
Declaratory Judgment Complaint without offering the
explanation that it occurred in response to settlement
negotiations. It is fundamental law that a party may not
introduce evidence at trial of offers to settle or compromise.
Whitney v. Pennick, Ky., 136 S.W.2d 570 (1940); Elam v.
Wollery, Ky., 258 S.W.2d 452 (1953). The Court cannot
allow the charge of retaliation to circumvent an otherwise
established rule of evidence.
The second reason for the change in the Courts opinion is
that the Court questions whether the actions of Defendant
Bank One in exercising its legal right to seek a declaratory
judgment may constitute “retaliation” under KRS Chapter
344. To so hold would effectively deny an employer its
rightful access to the courts which is guaranteed by Section
14 of the Kentucky Constitution. The Court may deny a
motion to amend a complaint when the proposed
amendment fails to state a claim upon which relief can be
granted. First National Bank of Cincinnati v. Hartmann,
Ky.App., 747 S.W.2d 614, 616 (1988).
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WHEREFORE IT IS HEREBY ORDERED that Plaintiffs
Motion to Amend Complaint is DENIED.
CR 15.01 governs amendments to pleadings:
A party may amend his pleading once as a matter of
course at any time before a responsive pleading is served
or, if the pleading is one to which no responsive pleading is
permitted and the action has not been placed upon the trial
calendar, he may so amend it at any time within 20 days
after it is served. Otherwise a party may amend his pleading
only by leave of court or by written consent of the adverse
party; and leave shall be freely given when justice so
requires. A party shall plead in response to an amended
pleading within the time remaining for response to the
original pleading or within 10 days after service of the
amended pleading, whichever period may be longer, unless
the court otherwise orders.3
Murphy first sought to amend her complaint in November of 1996 - over a month after
one of the defendants, Gaunt, filed and served his answer. Because Murphy sought to
add the retaliation claim after she had been served with a responsive pleading, she
could not amend her complaint as a matter of course,4 and instead sought leave of the
court by filing a motion to amend her complaint.
We allow the trial courts discretion with regard to such motions, and review their
rulings for abuse of that discretion.5 However, this Court has recognized “the freedom
‘CR 15.01.
4a Keweenaw Bav Indian Communitv v. State of Michiaan, 11 F.3d 1341,
1348 (6th Cir. 1993) (“mhe responsive pleading by the State defendants cut off the
Community’s right to amend as a matter of course.” Id.); Textor v. Bd. of Regents of N.
III. Univ., 711 F.2d 1387, 1391 n.1 (7th Cir. 1983); Wood v. Santa Barbara Chamber of
Commerce, 705 F.2d 1515, 1521 (gth Cir. 1983) cert. denied 465 U.S. 1081, 79
L.Ed.2d 765, 104 S.Ct. 1446 (1984).
‘See Graves v. Winer, Ky., 351 S.W.2d 193, 197 (1961) (“Though CR 15.01
provides that leave to amend ‘shall be freely given when justice so requires,’ it is still
discretionary with the trial court, whose ruling will not be disturbed unless it is clearly an
(continued...)
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with which pleadings may be amended’16 and that CR 15.01’s language reflects policy
considerations “favor[ing] the right of litigants to have their rights disposed of on the
merits rather than technicalities.“’ Accordingly, we factor those policy considerations
into our abuse-of-discretion review and focus upon whether the amendment fails to
state a claim upon which the trial court could grant relief, or, in other words “the futility
of the amendment itself,“’ and:
The primary consideration of the court should be the
proper presentation of the merits of the case. Amended
pleadings should be permitted to the extent that they are an
aid in the proper disposition of the controversy, provided the
party acts in good faith and not for the purpose of delay, and
‘(...continued)
abuse.” Id.); Bradford v. Billinaton, Ky., 299 S.W.2d 601, 603 (1957) (“While liberality in
granting leave to amend is desirable, the application is addressed to the sound
discretion of the trial judge.” Id.).
6Hoke v. Cullinan, Ky., 914 S.W.2d 335, 339 (1996).
‘Kentucky Home Mut. Life Ins. Co. v. Hardin, 277 Ky. 565, 126 S.W.2d 427, 431
(1939).
*a Shermoen v. United States, 982 F.2d 1312, 1319 (gth Cir. 1992) (“We
review for an abuse of discretion the district court’s denial of leave to amend after
responsive pleadings have been filed. The denial is, however, ‘strictly reviewed in light
of the strong policy permitting amendment.“’ Id. (citations omitted)).
‘First Nat. Bank of Cincinnati v. Hartmann, Ky.App., 747 S.W.2d 614, 616
(1988). See also Stern v. United States Gypsum. Inc., 547 F.2d 1329, 1334 (1977):
Rule 15(a) provides that “leave shall be freely given when
justice so requires,” and this circuit has adopted a liberal
policy respecting amendments to pleadings so that cases
may be decided on the merits and not on the basis of
technicalities. As was stated in Fuhrer v. Fuhrer, [292 F.2d
140, 143 (7’” Cir. 1961)] “leave to amend should be freely
aiven unless it aooears to a certaintv that olaintiff would not
be entitled to any relief under any state of facts which could
be oroved in support of his claim.”
Id. (emphasis added and citations omitted).
-7-
the opposing party is not prejudiced or the trial unduly
delayed .I0
In my opinion, the trial court abused its discretion when it denied Murphy’s motion to
amend her complaint.
Bank One argues that the trial court correctly concluded that Murphy’s retaliation
claim was futile because: (1) Count Ill failed to state a claim upon which the trial court
could grant relief; (2) KRE 408 would prevent Murphy from proving the material facts
underlying her claims because those facts concern “settlement negotiations”; and (3)
Bank One’s attorneys cannot be individually liable for acts of retaliation. Each of these
arguments is independently flawed, and none of them support the trial court’s rulings.
Bank One argues that Count III of Murphy’s Amended Verified Complaint failed
to state a claim upon which the trial court could grant relief because (1) retaliation
claims require an “adverse employment action,” and, as a matter of law, the filing of a
federal declaratory judgment action is not an adverse employment action; (2) Kentucky
Constitution § 14 guarantees Bank One access to the courts; and (3) under the United
States Constitution’s supremacy clause, the Federal Declaratory Judgments Act trumps
the Kentucky Civil Rights Act. I will address each conclusion in turn.
First, although the federal courts have traditionally required plaintiffs to
demonstrate an adverse employment action as an element of the prima facie case for
retaliation,” many of the Circuit Courts of Appeal have embraced a broad view of
“Kurt A. Phillips, Jr., 15 Kentucky Practice (Rules of Civil Procedure Annotated)
§15.01, Comment 3 at 299 (West Publishing Co. 1995).
“See Harrison v. Metro. Gov’t of Nashville and Davidson City. Tenn., 80 F.3d
1107, 1118 (6th Cir. 1996), Wrenn v. Gould, 808 F.2d 493, 500 (6th Cir. 1987).
-8-
adverse employment actions12 and have recognized that “[t]he law deliberately does not
take a ‘laundry list’ approach to retaliation, because unfortunately its forms are as varied
as the human imagination will permit,“13 and held that “even actions taken in litigation
could constitute retaliation in appropriate circumstances.“‘4
‘*See Ray v. Henderson, 217 F.3d 1234, 1241-2 (gth Cir. 2000) (observing that
“the First, Seventh, Tenth, Eleventh and D.C. Circuits . . . all take an expansive view of
the type of actions that can be considered adverse employment actions.” Id. at 1241).
See also Berry v. Stevinson Chevrolet, 74 F.3d 980, 985 (lOth Cir. 1996) (rhetorically
reconfiguring the “adverse employment action” element when defining the prima facie
case for retaliation as: “(1) protected opposition to Title VII discrimination or
participation in a Title VII proceeding; (2) adverse action by the employer subsequent to
or contemporaneous with such employee activity; and (3) a causal connection between
such activity and the emolover’s adverse action.” Id. (emphasis added)).
13Knox v. Indiana, 93 F.3d 1327, 1334 (7th Cir. 1996).
14Steffes v. Steoan Co., 144 F.3d 1070, 1075 (7’” Cir. 1998). See also Berry v.
Stevinson Chevrolet, supra note 12 at 985-6 (finding a prima facie retaliation case in an
allegation of malicious prosecution); Beckham v. Grand Affair of North Carolina. Inc.,
671 F.Supp 415, 419 (W.D.N.C. 1987) (“pr]he allegation that Defendant caused Plaintiff
to be arrested and prosecuted in retaliation for her having filed or contemplated an
EEOC charge against Defendant states a cause of action against Defendant under 42
U.S.C. § 2000e-3(a).” Id.); Yankelevitz v. Cornell Universitv, 1996 U.S. Dist. LEXIS
11298, 71 Fair Empl. Prac. Cas. (BNA) 1662 (S.D.N.Y. 1996) (“mhe Court is unwilling
to adopt a rule stating that compulsory counterclaims, or any other legal cause of
action, cannot, as a matter of law, constitute retaliation in violation of the employment
discrimination laws.” Id. at 14); EEOC v. Levi Strauss & Co., 515 F.Supp. 640, 643
(N.D.III. 1981) (“[A] state court defamation action filed in retaliation for having engaged
in conduct protected by § 704(a), including the filing of a charge with the Commission,
violates [the anti-retaliation provisions.]” Id.); EEOC v. Virainia Carolina Veneer Corp.,
495 F.Supp. 775, 778 (W.D.Va. 1980) (granting summary judgment to plaintiff on
retaliation claim based on defendant’s filing of groundless state court defamation
action). Even the primary authority cited by Bank One, Zanders v. National Railroad
Passenaer Corooration, 898 F.2d 1127 (6th Cir. 1990) examines the plaintiffs claim that
the defendant brought a lawsuit against her in retaliation for her testimony in connection
with a former co-worker’s employment discrimination case in the context of summary
judgment - not FRCP 12(b)(6) - and evaluated the plaintiffs evidence of retaliatory
motivations. See Id. at 1136 (“Viewed in light of the evidentiary burdens in this case,
and given Zanders’ burden to prove that the state lawsuit was a means of retaliating
against her, Zanders has failed to present any evidence which would tend to show that
Amtrak’s articulated reason was pretextual.” Id.).
-9-
Second, although this Court has stated that, because of the overlapping policy
goals, federal authority “offers some guidance”15
to Kentucky Courts faced with
interpretive questions, Bank One’s reliance upon federal authority in this instance
ignores substantive differences between the Kentucky and federal statutes.
Kentucky’s anti-retaliation provision, KRS 344.280(l),
explicitly makes it unlawful for
any person “[t]o retaliate or discriminate in anv manner against a person . . . because
he has made a charge . . . under this chapter.“” The Kentucky provision is thus
broader than the one contained in Title VII of 1964 Civil Rights Act” because: (1) the
Kentucky provision applies to all persons instead of merely employers and labor
“Mountain Clav v. Com’n on Human Rights, Ky.App., 830 S.W.2d 395, 396
(1992).
16KRS 344.280(l).
*‘a 42 U.S.C. § 2000e-3 (2001):
(a) Discrimination for making charges, testifying, assisting,
or participating in enforcement proceedings. It shall be an
unlawful employment practice for an employer to
discriminate against any of his employees or applicants for
employment, for an employment agency, or joint labormanagement committee controlling apprenticeship or other
training or retraining, including on-the-job training programs,
to discriminate against any individual, or for a labor
organization to discriminate against any individual, or for a
labor organization to discriminate against any member
thereof or applicant for membership because he has
opposed any practice made an unlawful unemployment
practice by this title or because he has made a charge,
testified, assisted, or participated in any manner in an
investigation, proceeding, or hearing under this title.
Id.
-lO-
organizations;18 and (2) the Kentucky provision condemns any retaliatory act instead of
merely acts of discrimination.
Finally, in Mountain Clav v. Commission on Human Riahts,lg the Court of
Appeals has interpreted KRS 344.280(
1)‘s language to include retaliatory litigation:
The Kentucky Civil Rights Act was enacted “to safeguard
all individuals within the state from discrimination because of
race, color, religion, national original, sex, and age” and to
“further the interest, rights and privileges of individuals within
the state.” KRS 344.020(b). The prohibition against
employer retaliation was enacted to protect these rights. As
one court has said, “retaliation, whether in the form of a
subsequent discharge or court proceeding, places an added
cost on the exercise of those rights and as such has a
‘chilling effect.’ Only by enjoining suits filed in retaliation for
the exercise of protected rights can those rights be
ensured.“*’
Bank One argues that the facts of this case are factually distinguishable from
Mountain Clav. While the defendant in Mountain Clay sought an injunction to prevent
the Commission from conducting a hearing on the plaintiffs sexual discrimination claim
and requested that the plaintiff “be held personally liable for all costs incurred by the
corporation in defending against her action,“*’ Bank One sought only declaratory
judgment and specifically disclaimed any entitlement to costs or attorneys’ fees. We
‘“a KRS 344.010(l) (“‘Person’ includes one (1) or more individuals, labor
organizations, joint apprenticeship committees, partnerships, associations,
corporations, legal representatives, mutual companies, joint-stock companies, trusts,
unincorporated organizations, trustees, trustees in bankruptcy, fiduciaries, receivers, or
other legal or commercial entity; the state, any of its political or civil subdivisions or
agencies.” Id.); Palmer v. Intern. Ass’n of Machinists, supra note 1 at 120 (remanding
retaliation action against two non-employer individuals)
19Supra note 15.
201d. at 397 (quoting EEOC v. Levi Strauss & Co., supra note 14 at 642).
“ld. at 396.
-1 l-
believe, however, that this emphasis on facts ignores the nature of the inquiry whether Count ill of Murphy’s amended complaint states a claim upon which relief can
be granted. While the factual differences may be relevant to whether Murphy can
prevail on the merits of her claim by proving that Bank One had retaliatory purposes for
filing the action in federal court,** authority from both the federal courts and the
Kentucky Court of Appeals supports the conclusion that litigation brought in bad faith
and for retaliatory purposes can constitute actionable retaliation. Bank One’s decision
to file a federal declaratory judgment action raises the possibility of coercive retaliatory
purposes because the federal case created an additional layer of expense and
*‘See Kentucky Center for the Arts v. Handley, Ky.App., 827 S.W.2d 697, 701
(1992):
The plaintiff, in making out a prima facie case, must show
that 1) she engaged in a protected activity, 2) she was
disadvantaged by an act of her employer, and 3) there was a
causal connection between the activity engaged in and the
employer’s act. Again, if the employer articulates a
legitimate, non-retaliatory reason for the decision, the
employee must show that “but for” the protected activity, the
adverse action would not have occurred.
Id.; Zanders v. National Railroad Passenaer Corp., supra note 14 at 1134 (“In a
retaliation claim, a plaintiff alleges that she has been mistreated for engaging in
protected activity, and that the employer’s motivations are therefore illicit. Thus, a
retaliation claim is analogous to an intentional discrimination claim, or ‘disparate
treatment’ claim, where the emolovee must prove the emolover’s discriminatorv intent.”
Id. (emphasis added)); EEOC v. Levi Strauss Co., supra note 14 at 644 (“[IIt cannot be
concluded that all defamation actions in the wake of sexual harassment charges filed
before the Commission are violations of Title VII. Rather those suits initiated in state
court in good faith and as an attempt to rehabilitate the employer’s reputations which
may have been tarnished by the charges are not necessarily violations of the Act. . . .
mhe Commission must demonstrate that the action was filed for improper, i.e.
retaliatory purposes.” Id.).
-12-
exposure. Murphy “must yet prove her case, and nothing in this opinion should be read
to suggest a particular outcome on the merits of Plaintiffs claim.“23
Bank One’s latter two arguments concerning Kentucky Constitution § 14 and the
supremacy clause of the United States Constitution constitute little more than
grandstanding because the fact that state anti-discrimination law would provide a
remedy for retaliatory abuse of the federal declaratory judgment process does not
implicate either constitutional provision. Parties remain free to seek declaratory
judgment in the federal courts, but may not abuse that right with impunity. In Raine v.
Drasin,24 this Court stated that “[plublic policy requires that all persons be able to freely
resort to the courts for redress of a wrong, and the law should and does protect them
when they commence a civil . . . action in aood faith and upon reasonable arounds.” If
a party uses the courts to coerce an individual into abandoning her employment
discrimination claim, these constitutional provisions offer no refuge.
Nor do the Kentucky Rules of Evidence provide a basis for concluding that
Murphy’s claim is futile. Intially, I would note that questions regarding a plaintiffs ability
to prove the merits of his or her claim are not relevant to whether that claim is one upon
which relief can be granted. In this case, however, it does not appear that the Rules of
Evidence would interfere with Murphy’s proof. Although Murphy’s retaliation claim is
connected with Bank One’s actions during the course of settlement negotiations, KRE
408 prohibits the introduction of offers to compromise and statements made in the
context of settlement negotiations only if such evidence is offered to “prove liability for
23Beckham v. Grand Affair of North Carolina. Inc., supra note 14 at 419-420.
24Ky., 621 S.W.2d 895, 899 (1981).
251d. (emphasis added).
-13-
or invalidity of the claim or its amount”26 and KRE 408 specifically states that it “does
not require exclusion when the evidence is offered for another purpose . . . .‘I*’
Accordingly, while policies favoring voluntary dispute resoIution28
would prevent Murphy
from introducing evidence that Bank One offered a sum of money to settle her claim as
evidence of Bank One’s liability for sexual harassment, KRE 408 would not prevent her
from framing the context of Bank One’s decision to unilaterally and without warning
withdraw from settlement negotiations and file a federal declaratory judgment action as
evidence of bad faith.
Finally, the trial court erroneously held that Bank One’s attorneys could not be
individually liable under Kentucky’s anti-retaliation provision because they did not have
an employer-employee relationship with Murphy. KRS 344.280(l) refers to the unlawful
practices of “a person, or . . , two (2) or more persons [in conspiracy]“*’ and the word
“employer” cannot be found in this provision. This Court has interpreted this language
according to its plain meaning to include non-employers.3o
Of course, Murphy must
prove retaliatory motives on the part of any defendant before she may prevail on her
claim, but the trial court abused its discretion when it denied Murphy’s motion to amend
26KRE 408.
28See 1992 Kentucky Evidence Rules Study Commentary to KRE 408 (“The law
has long fostered voluntary dispute resolution by protecting against the possibility that a
compromise or offer of compromise might be used to the disadvantage of a party in
subsequent litigation. This is the essence of the first sentence of Rule 408 . . . . ” Id.).
29KRS 344.280(l).
3oSee suora note 18 and surrounding text.
-14-
her complaint to include a KRS 344.280(l) retaliation claim against Bank One’s
attorneys.
Because none of the reasons given for the trial court’s rulings withstand scrutiny
and proper presentation of the merits of this action requires consideration of Murphy’s
KRS 344.280(l) retaliation claim, the trial court abused its discretion when it concluded
that Count III in Murphy’s Amended Verified Complaint failed to state a claim upon
which relief could be granted. I would affirm the entirety of the Court of Appeals opinion
and remand the case to the trial court for it to allow Murphy to amend her complaint to
include Count III.
Stumbo, J., joins this opinion, concurring in part and dissenting in part.
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