LEXINGTON-FAYETTE URBAN COUNTY HUMAN RIGHTS COMMISSION and MELORIS BAKER v. WAL-MART STORES, INC.
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RENDERED: July 11, 2003; 10:00 a.m.
TO BE PUBLISHED
Commonwealth Of Kentucky
Court of Appeals
NO. 2002-CA-001461-MR
LEXINGTON-FAYETTE URBAN COUNTY
HUMAN RIGHTS COMMISSION and
MELORIS BAKER
APPELLANTS
APPEAL FROM FAYETTE CIRCUIT COURT
HONORABLE GARY D. PAYNE, JUDGE
ACTION NO. 01-CI-04760
v.
WAL-MART STORES, INC.
APPELLEE
OPINION
REVERSING AND REMANDING
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BEFORE:
COMBS, GUIDUGLI, and SCHRODER, Judges.
COMBS, JUDGE:
Lexington-Fayette Urban County Human Rights
Commission (the Commission) and Meloris Baker appeal from an
Opinion and Order of June 14, 2002, of the Fayette Circuit
Court.
The circuit court vacated a decision of the Commission
that had favored Baker; it ordered the Commission to conduct a
new hearing on her charge of discrimination against the
appellee, Wal-Mart Stores, Inc., (Wal-Mart).
After reviewing
the record, we reverse and remand.
On October 4, 1999, Baker filed a charge with the
Commission complaining that employees of Wal-Mart mistreated her
because of her race and/or national origin.
Baker, a black
woman of Jamaican descent, alleged that while shopping at WalMart in Lexington on September 3, 1999, she was wrongfully
accused of shoplifting after an electronic device was activated
as she exited the store.
Baker stated that she fully complied
with the requests of the store’s employees that she re-enter the
store and empty the contents of her backpack.
She also agreed
to walk back and forth through the door in an attempt to
determine why the alarm had sounded.
Although a search of her
belongings failed to uncover any merchandise for which Baker had
not paid, she nonetheless was repeatedly accused of having
stolen something.
After Baker left, two or three of Wal-Mart’s
employees followed her to a nearby store and told its owner to
“watch” Baker, claiming that she was a “thief.”
The Commission notified Wal-Mart of her charge by
certified mail.
Danny Lester signed the receipt to be returned
to the Commission.
Kirk Guthrie, a paralegal who worked at Wal-
Mart’s home office in Bentonville, Arkansas, responded to
Baker’s charges and identified himself as the person to whom the
Commission should forward all future correspondence concerning
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the discrimination claim.
He informed the Commission that
Baker’s claims were without merit.
He contended that the store
employees were merely responding to the electronic alarm in
order to make certain that all of the items that Baker had
purchased were de-activated.
He claimed that the incident “had
nothing to do with [Baker’s] race or national origin.”
In conducting its investigation, the Commission (with
Guthrie’s cooperation) interviewed the individuals who
participated and/or witnessed the events of which Baker
complained.
On March 12, 2001, the Commission informed the
parties that its investigation had uncovered “substantial
evidence” in support of Baker’s version of the events that
transpired on September 3, 1999, while failing to reveal any
evidence in support of Wal-Mart’s defense.
The Commission then
notified the parties that a representative of the Commission
would contact each of them within two weeks to begin the
conciliation process.
At the time of making its probable cause
determination, the Commission was unaware that Guthrie was no
longer employed by Wal-Mart.
Even after it received the adverse
determination, Wal-Mart failed to notify the Commission that
Guthrie was no longer a member of its legal team or to advise
the Commission of his replacement.
Over the next several weeks,
the Commission sent the following letters to Guthrie:
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(1) a letter (mailed on March 22, 2001)
inviting the parties “to join in a
collective effort” to resolve the matter and
setting a deadline of April 5, 2001, for the
conciliation process;
(2) a Notice of Unsuccessful Conciliation
(April 17, 2001);
(3) a Final Notice of Unsuccessful
Conciliation (May 1, 2001);
(4) an order appointing a hearing officer
(May 23, 2001); and
(5) a Notice of Pre-Hearing Conference
scheduled for June 11, 2001 (May 23, 2001).
All mail continued to be addressed to Guthrie in care of the
Wal-Mart Legal Team at Wal-Mart’s home office in Arkansas.
Wal-
Mart failed to respond to any of the letters and did not attend
the pre-hearing conference.
On June 18, 2001, the Commission sent Wal-Mart a PreHearing Order by certified mail.
signed to acknowledge receipt.
Once again, Danny Lester
This order notified Wal-Mart
that a public hearing would be conducted on Baker’s claim on
July 9, 2001.
In her order, the hearing officer cautioned Wal-
Mart that if it continued to be unresponsive to the Commission’s
proceedings, it was in danger of having a default judgment
entered against it on the issue of liability.
Wal-Mart did not
respond nor did it attend the public hearing.
In her findings of fact and conclusions of law entered
on August 23, 2001, the hearing officer found that Wal-Mart had
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been sent appropriate notice of the hearing and had failed to
attend or respond in any way.
Granting Baker’s motion for a
default judgment on the issue of liability, the hearing officer
also found that Baker had presented evidence that she had been
singled out for disparate treatment based on her race and
national origin.
The hearing officer recommended that Baker be
awarded damages of $2,500 to compensate her for the discrimination she had suffered and a similar sum for her embarrassment
and humiliation.
These recommendations were mailed to Guthrie
by certified mail on August 23, 2001.
On September 7, 2001, Wal-Mart filed a motion before
the Commission requesting that it set aside the default judgment
and conduct a new hearing.
It supported the motion with the
affidavit of Graham Jones, a paralegal at the office in
Bentonville, Arkansas, who stated that Guthrie had not been
employed at Wal-Mart since prior to March 2001.
Jones further
averred that Wal-Mart’s corporate legal team had not received
any correspondence from the Commission regarding the scheduled
hearing and that it was totally unaware that the matter was
being pursued by the Commission.
Wal-Mart asserted that the
only reason it had failed to participate in the hearing or prehearing conference was that it had not received notice of the
proceedings.
With respect to the certified mail receipts signed
by its employee, Lester, establishing service of the pre-hearing
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order and the notice of the public hearing, Wal-Mart suggested
that they might have been “lost or misrouted.”
Conspicuously
absent from Wal-Mart’s motion was an affidavit from Lester, the
sole employee who might have been able to shed some light on
what happened to all the mailings (both regular and certified)
sent by the Commission.
On September 24, 2001, the Commission remanded the
matter to the hearing officer and directed that she make
recommended findings of fact and conclusions of law with respect
to Wal-Mart’s motion to set aside the default judgment.
Accepting Wal-Mart’s argument that the Commission should have
contacted Wal-Mart in order to determine why Wal-Mart did not
respond to the conciliation letter, the hearing officer
recommended that the default judgment be set aside as follows:
The Commission cannot be expected to do
any more than what [it] did in notifying
[Wal-Mart] of the Pre-Hearing conference and
Public Hearing. Notices were sent by
certified mail, return receipt requested.
The receipt cards were properly returned to
the Commission. The Commission cannot be
held accountable for the misdirection or
destruction of these notices at [Wal-Mart’s]
corporate offices. However, the Commission
can be expected to have more than a wait and
see attitude regarding conciliation efforts.
On November 20, 2001, after reviewing the entire
record, the Commission denied Wal-Mart’s motion to set aside the
default judgment and adopted the order originally recommended by
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the hearing officer.
Wal-Mart then sought judicial review in
the Fayette Circuit Court.
In the opinion and order from which
the Commission and Baker have appealed, the circuit court
concluded as follows:
The Court, having considered the
arguments of the parties, holds that a new
hearing should be conducted. The Court does
not favor default judgments when there are
legitimate questions of actual notice, and
indeed has a strong preference for issues to
be settled on their merits. The Court feels
that Defendant Baker would not be unduly
prejudiced if another hearing were
conducted. The Court notes that the record
indicates that [Wal-Mart] had actively
participated in defending the charge against
it up until the letter regarding
reconciliation [sic] was sent. The Court
holds that equity and fairness require that
the merits of the case be explored. Thus,
the Commission’s November 20, 2001 Order is
set aside and a new hearing is to be
conducted.
In this appeal, the appellants argue that the lower
court erred in setting aside the Commission’s default judgment.
They contend that Wal-Mart could not and did not show
arbitrariness by the Commission in denying the motion to set
aside the default judgment.
Additionally, they claim that the
Fayette Circuit Court failed to articulate sufficient reasons
for vacating the Commission’s award to Baker.
They note that
Wal-Mart omitted any explanation as to why it chose not to
participate in the process, failed to articulate a valid
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defense, and failed to show any prejudice inherent in the
default judgment.
Wal-Mart maintains that the Fayette Circuit Court
acted properly within its discretion in vacating the
Commission’s order.
It cites Howard v. Fountain, Ky.App., 749
S.W.2d 690, 692 (1988), in support of its argument that “trial
courts possess broad discretion” in considering a motion to set
aside a default judgment.
However, this argument overlooks the
important fact that the circuit court was not acting as a trial
court of first instance in this matter; rather, it was acting in
an appellate capacity in reviewing the determination of an
administrative tribunal.
It was the Commission -— not the trial
court —- that enjoyed discretion in ruling on Wal-Mart’s motion
to set aside the default judgment.
The Commission’s ruling was,
therefore, entitled to the same deference from the reviewing
court as this court must accord to a trial court when reviewing
one of its discretionary rulings.
The Fayette Circuit Court was
not at liberty to make its own independent determination but was
bound and required to determine whether there was substantial
evidence in the record to support the action taken by the
administrative agency.
The scope of review of an agency’s decision either by
this court or by a circuit court is very limited.
Aubrey v.
Office of the Attorney General, Ky.App., 994 S.W.2d 516, 518
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(1998).
The focus of a court’s inquiry as to agency action is
ultimately concerned with the question of arbitrariness.
See,
Hougham v. Lexington-Fayette Urban County Government, Ky.App.,
29 S.W.3d 370, 373 (1999).
[T]he Courts do not have the authority to
review the agency decisions de novo.
American Beauty Homes Corp. v. Louisville
and Jefferson County Planning and Zoning
Commission, Ky., 379 S.W.2d 450, 458 (1964).
Judicial review of the administrative action
is confined to a determination of whether
the action taken was arbitrary. City of
Louisville v. McDonald, Ky., 470 S.W.2d 173,
178 (1971). So long as the agency’s
decision is supported by substantial
evidence of probative value, it is not
arbitrary and must be accepted as binding by
the appellate court. Starks v. Kentucky
Health Facilities, Ky.App., 684 S.W.2d 5
(1984).
Aubrey v. Office of the Attorney General, Ky.App., 994 S.W.2d
516, 518 (1998).
In exercising its discretion in ruling on the motion
to set aside the default judgment, the Commission was required
to consider whether Wal-Mart had a fair opportunity to present
its claim and whether granting the motion would result in
prejudice to Baker.
Haven Point Enterprises, Inc. v. United
Kentucky Bank, Inc., Ky., 690 S.W.2d 393, 394-95 (1985).
Although the circuit court intimated that there was a
“legitimate question” concerning the issue of notice, a review
of the record compiled before the Commission reveals
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considerable evidence that Wal-Mart had both actual and inquiry
notice of the proceedings before the Commission.
Therefore, we
find no merit in Wal-Mart’s oft-repeated contention that the
Commission’s decision resulted in a denial of its constitutional
right to procedural due process.
The record leaves no doubt
that Wal-Mart’s failure to defend itself did not result from an
absence of adequate notice by the Commission.
Rather, the
failure of Wal-Mart’s legal team to become apprised of the
proceedings was apparently the result of an internal corporate
problem.
As set forth earlier in this opinion, the Commission
complied with Wal-Mart’s directions in sending all notices to
Kirk Guthrie in care of the Wal-Mart Legal Team by first class
or certified mail.
Although Guthrie left his employment with
Wal-Mart during the Commission’s investigation of Baker’s
complaint, neither his replacement -- nor any other
representative of Wal-Mart -- notified the Commission of this
fact.
Furthermore, Wal-Mart anticipated hearing from the
Commission within two weeks of the probable cause determination
in order to discuss conciliation.
Nonetheless, Wal-Mart did not
contact the Commission when no further communication was
forthcoming.
In short, we know of nothing else that the
Commission could have done to comply with Wal-Mart’s rights to
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due process; nor does Wal-Mart suggest a reasonable or credible
alternative.
In Cox v. Rueff Lighting Company, Ky.App., 589 S.W.2d
606 (1979), a case factually similar to the one before us, this
court held that the disregard of a lawsuit due to the carelessness either of a party or of its attorney is not a reasonable
basis to set aside a judgment.
In Rueff Lighting, the process
agent for a corporation threw away a registered letter
containing a summons and complaint after allegedly having
mistaken it for junk mail.
The trial court refused to set aside
the default judgment against the corporation, and this court
found no abuse of the trial court’s discretion.
Similarly, in
this case, the Commission denied the motion to set aside the
default judgment in light of Wal-Mart’s claim that no fewer than
seven pieces of mail were either lost or misplaced.
As in Cox,
supra, the issue involved the credibility of those claiming
ignorance of the process –- a factual matter appropriate for
determination solely by the Commission.
Considering the substantial evidence that Wal-Mart was
provided with notice of all of the proceedings before the
Commission, we do not agree that the failure of the Commission
to address the specific issue of prejudice requires a reversal
of its judgment.
The trial court did not believe that Baker
would suffer any prejudice if a new hearing were conducted.
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Regardless of the arguable prejudice to Baker, we conclude that
the Commission did not abuse its discretion.
It properly held
Wal-Mart duly accountable for an alleged breakdown within its
own corporate structure that prevented the numerous Commission
mailings from reaching the responsible personnel.
We find no
arbitrariness in the action of the Commission denying relief to
Wal-Mart under the particular circumstances of this case.
Finally, Wal-Mart argues that the Commission was not
entitled to a default judgment by claiming that it did not
comply with its own procedures.
Specifically, Wal-Mart contends
that the notice of the public hearing was not served twenty days
before the hearing conducted on July 9, 2001.
However, the
record indicates otherwise.
Two notices concerning the July 9th hearing were sent
to Wal-Mart.
The first, a pre-hearing order, was sent by
certified mail on June 18, 2001 -- more than twenty days before
the hearing.
The second, a notice of public hearing, was sent
by certified mail on June 26.
Wal-Mart refers only to the later
notice in making this argument and ignores the pre-hearing order
that satisfied the Commission’s 20-day notice requirement.
The judgment of the Fayette Circuit Court is reversed,
and this matter is remanded with directions to reinstate the
Commission’s award.
ALL CONCUR.
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BRIEF AND ORAL ARGUMENT FOR
APPELLANTS:
Edward E. Dove
Lexington, Kentucky
BRIEF FOR APPELLEE:
Kathryn A. Quesenberry
Elizabeth N. Monohan
Louisville, Kentucky
ORAL ARGUMENT FOR APPELEE:
Elizabeth N. Monohan
Louisville, Kentucky
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