Bourbon, Kenneth v. Kmart Corporation

In the

United States Court of Appeals

For the Seventh Circuit

No. 98-2433

KENNETH BOURBON,

Plaintiff-Appellant,

v.

KMART CORPORATION,

Defendant-Appellee.

Appeal from the United States District Court

for the Southern District of Illinois.

No. 97 C 182--William D. Stiehl, Judge.

Submitted September 23, 1999--Decided August 4, 2000

Before POSNER, MANION and ROVNER, Circuit Judges.

ROVNER, Circuit Judge. Kenneth Bourbon sued his

employer, Kmart Corporation, under Illinois law

for retaliatory discharge, claiming Kmart fired

him after he complained that his supervisor was

engaged in dishonest and unethical behavior

towards customers. The district court granted

summary judgment in favor of Kmart because

Illinois law allows suits for retaliatory

discharge only under very limited circumstances,

and because Bourbon could not show that Kmart’s

stated reason for the discharge was pretextual.

We affirm.

I.

Bourbon began working as an automobile mechanic

at the Wood River, Illinois Kmart in January

1995. Bourbon had worked at two other Kmart

locations in 1994 without incident, but was fired

from the Wood River store after only one month.

According to Bourbon, he was terminated for

reporting to the personnel department on two

occasions that his supervisor had engaged in

dishonest and unethical conduct towards

customers. In particular, he reported that on one

occasion, he accidentally broke a part on a

customer’s car, and offered to pay for a

replacement part himself. Instead, his supervisor

charged the customer for the extra repair, and

used a junkyard part to effect the repair. On

another occasion, he reported that a customer was

charged for an unnecessary replacement of a rack

and pinion steering system when another mechanic

misdiagnosed a problem. Both customers were

eventually fully reimbursed by Kmart for these

overcharges. Shortly after reporting these

incidents, Bourbon’s supervisor approached him to

complain about his work performance and attitude.

A little more than a month after Bourbon began

his employment at the Wood River Kmart, he was

terminated. Kmart, of course, contended that

Bourbon was terminated for performance problems

and not in retaliation for bringing questionable

conduct to light.

Bourbon sued Kmart in Illinois state court and

the case was removed to the United States

District Court for the Southern District of

Illinois. Bourbon’s amended complaint in that

court charged only that Kmart fired him in

retaliation for reporting dishonest and unethical

behavior by his supervisor. At the close of

discovery, Kmart moved for summary judgment on

the ground that the Illinois tort of retaliatory

discharge did not protect employees who reported

dishonest or unethical conduct but rather

protected only employees who reported criminal

conduct or who filed workers’ compensation

claims. In response, Bourbon pointed out that his

supervisor’s conduct constituted theft by

deception under Illinois law, and therefore his

reporting of that conduct came within the purview

of the retaliatory discharge tort. The district

court employed the McDonnell-Douglas burden

shifting analysis to Bourbon’s claim and found

that Bourbon could not show that Kmart’s

legitimate, non-discriminatory reason for his

termination was pretextual. See McDonnell-Douglas

Corp. v. Green, 411 U.S. 792 (1973).

Alternatively, the district court found that even

if Bourbon met the standard under McDonnell-

Douglas, he could not show that his termination

was in violation of clear public policy because

he was reporting unethical, dishonest behavior

and not criminal behavior when he was fired. The

district court therefore granted summary judgment

in favor of Kmart. Bourbon appeals.

II.

On appeal, Bourbon takes issue with the

district court’s application of McDonnell-Douglas

to his claim for retaliation, arguing that burden

shifting is appropriate only at trial or in the

context of a motion for judgment notwithstanding

the verdict. Bourbon also argues that there was

a material dispute regarding the reason for his

termination that could be resolved only at trial.

Kmart, in turn, contends that Bourbon’s

termination does not come within the scope of the

retaliatory discharge tort because Bourbon claims

only that he was fired for reporting unethical

and dishonest conduct, and not for reporting any

criminal activity. Kmart also asserts that

Bourbon has no proof that he was performing

satisfactorily at the time he was fired, and that

he thus cannot make out a prima facie case under

McDonnell-Douglas.

Illinois law allows claims for retaliatory

discharge when an employee is terminated for

filing a workers’ compensation claim or because

the employee has reported the employer’s criminal

conduct, either to law enforcement personnel or

to the company itself. See Kelsay v. Motorola,

Inc., 384 N.E.2d 353 (Ill. 1978) (recognizing for

the first time the tort of retaliatory discharge

when an employee was terminated for asserting

rights under workers’ compensation law);

Palmateer v. International Harvester Co., 421

N.E.2d 876 (Ill. 1981) (expanding tort of

retaliatory discharge to encompass terminations

of employees who were fired because they reported

employer’s criminal conduct to law enforcement

authorities); Petrick v. Monarch Printing Corp.,

444 N.E.2d 588 (Ill. App. 1 Dist. 1982)

(recognizing retaliatory discharge when employee

reports criminal conduct to supervisors instead

of law enforcement personnel); Belline v. K-Mart

Corp., 940 F.2d 184, 187 (7th Cir. 1991)

(applying tort of retaliatory discharge where an

employee reports unlawful conduct to an

employer). A valid claim for retaliatory

discharge requires a showing that (1) an employee

has been discharged; (2) in retaliation for the

employee’s activities; and (3) that the discharge

violates a clear mandate of public policy.

Hartlein v. Illinois Power Co., 601 N.E.2d 720,

728 (Ill. 1992). "The element of causation is not

met if the employer has a valid basis, which is

not pretextual, for discharging the employee."

Id. No one disputes that Bourbon was discharged.

Kmart disputes that he was discharged because he

reported the customer overcharges, and also

maintains that firing an employee for reporting

unethical conduct falls outside the scope of the

tort of retaliatory discharge.

The question of whether Bourbon’s reporting of

his supervisor’s conduct is within the scope of

the tort is a close question. The fact that

Bourbon may have been wrong about whether the

conduct was criminal is irrelevant under Illinois

law. See Palmateer, 421 N.E.2d at 880; Belline,

940 F.2d at 188. The Illinois Supreme Court

explained that persons acting in good faith who

have probable cause to believe crimes have been

committed should not be deterred from reporting

them by the fear of being wrongfully discharged.

Palmateer, 421 N.E.2d at 880. Bourbon’s initial

characterization of his supervisor’s conduct as

dishonest and unethical does not change the fact

that, under Illinois law, Bourbon may have

reasonably believed that the conduct also meets

the definition of theft by deception. See 720

ILCS sec. 5/16-1. Bourbon’s firing in retaliation

for reporting that conduct would therefore likely

meet the standard set forth in Palmateer as being

in violation of a clear mandate of public policy,

a policy against theft. Indeed, in Palmateer, the

crime reported by the discharged employee was

theft of a $2 screwdriver, and the court

emphasized that it was not the magnitude of the

crime that mattered but whether the General

Assembly had decided that the crime should be

resolved by resort to the criminal justice

system. So too with the conduct Bourbon

complained about here. The Illinois General

Assembly has decided that depriving persons of

their property by means of deception is a crime

under Illinois law, and Bourbon’s reporting of

that conduct cannot be used as the reason for his

termination even though he is otherwise an at-

will employee. Nor is it determinative that Kmart

eventually reimbursed these customers or that the

Attorney General refused to pursue the matter.

For the purposes of Illinois law, all that

matters is that when Bourbon reported the

conduct, he reasonably believed his supervisor

was engaged in unlawful activity. Belline, 940

F.2d at 188.

Bourbon’s case, however, fails on the element

of causation, for he has insufficient evidence

demonstrating a link between reporting his

supervisor’s conduct and his termination. As we

mentioned above, the element of causation is not

met if the employer has a valid basis, which is

not pretextual, for discharging the employee.

Hartlein, 601 N.E.2d at 728. Bourbon has

presented no direct evidence that the reason for

his termination was his reporting of the

overcharges. No one admitted to him, for example,

that he was being fired for that reason. Rather,

Kmart claims that it terminated Bourbon’s

employment because he was an incompetent

mechanic, and the company presented documentation

of the problems it had with Bourbon’s work.

Bourbon’s lack of direct evidence is not

determinative, however. Illinois retaliatory

discharge cases brought in federal court may be

analyzed using the burden-shifting method

presented in McDonnell-Douglas. See Hiatt v.

Rockwell Int’l Corp., 26 F.3d 761, 767 (7th Cir.

1994). To establish a prima facie case using this

method, Bourbon must show that he was in a

protected class, that he was performing his job

satisfactorily, that he was nevertheless the

subject of a materially adverse employment

action, and that others outside the class were

treated more favorably. Hiatt, 26 F.3d at 767-68.

If Bourbon can establish his prima facie case,

Kmart must then articulate a legitimate, non-

discriminatory reason for his termination. The

burden then shifts back to Bourbon to show that

Kmart’s proffered reason is nothing more than a

pretext for unlawful discrimination. Id.

Bourbon’s proof fails in at least two regards

using this method. First, he has no evidence

showing that he was performing his job to Kmart’s

satisfaction. All reports of his performance in

his short stay at the Wood River Kmart were

negative, detailing complaints by customers, co-

workers and supervisors regarding Bourbon’s work

performance and attitude. That Bourbon had

successfully, and briefly, worked at two other

Kmart locations before coming to the Wood River

store is irrelevant to his performance there. But

even if we were able to find that there was at

least a question as to his performance, he cannot

show that his employer’s stated reason for

terminating him is pretextual. Indeed, the only

evidence that he has to demonstrate pretext is

the close relation in time between his reporting

of the overcharges and his termination. We have

held that temporal proximity alone is not enough

to prove pretext. See Roberts v. Broski, 186 F.3d

990, 995 (7th Cir. 1999)./1 The district court

therefore correctly entered summary judgment in

favor of Kmart.

AFFIRMED.

/1 As we noted in Broski, chronology can sometimes

support an inference that a discharge is

discriminatory. For example, when an employee

receives praise one day and is confronted with a

laundry list of criticism the next, she may be

able to establish pretext where the only

intervening event was the disclosure that she is

disabled. Bourbon has no such claim here because

Kmart’s criticism of him was consistent

throughout his one month tenure at the store. See

Broski, 186 F.3d at 995 n.3.

Posner, Circuit Judge, concurring. I join the

panel’s opinion but write separately to flag for

future consideration an issue (ignored by the

parties, hence waived) that is implicit in the

following sentence in the opinion: "Illinois

retaliatory discharge cases brought in federal

court may be analyzed using the burden-shifting

method presented in McDonnell-Douglas [Corp. v.

Green, 411 U.S. 792 (1973)]" (emphasis added). In

support of this proposition, the opinion cites

Hiatt v. Rockwell Int’l Corp., 26 F.3d 761, 767

(7th Cir. 1994), which in turn cites McEwen v.

Delta Air Lines, Inc., 919 F.2d 58 (7th Cir.

1990). Neither case cites any authority for the

proposition other than Hiatt’s citation of

McEwen. The only reason given for the result is

a statement in McEwen that since the McDonnell-

Douglas standard regulates merely the order of

proof, it is procedural rather than substantive

within the meaning of the Erie doctrine and it

therefore governs diversity cases as well as

federal-question cases. So even though the

Supreme Court of Illinois expressly rejected the

application of McDonnell-Douglas to Illinois

retaliatory-discharge cases in Clemons v.

Mechanical Devices Co., 704 N.E.2d 403, 407-08

(Ill. 1998), should such a case wander into

federal court by virtue of the diversity

jurisdiction the court should apply McDonnell-

Douglas to it.

Our sister circuits have assumed, to the

contrary, that state law, not federal law,

governs the burden-shifting standard applicable

to cases in which the rule of decision is state

rather than federal. E.g., Perry v. Woodward, 199

F.3d 1126, 1141-42 (10th Cir. 1999); Norville v.

Staten Island University Hospital, 196 F.3d 89,

95 (2d Cir. 1999); Payne v. Norwest Corp., 185

F.3d 1068, 1073-74 (9th Cir. 1999); Carpenter v.

Federal Nat’l Mortgage Ass’n, 165 F.3d 69, 72

(D.C. Cir. 1999); Mullin v. Raytheon Co., 164

F.3d 696, 699 (1st Cir. 1999); King v. Herbert J.

Thomas Memorial Hospital, 159 F.3d 192, 198 (4th

Cir. 1998); Lee v. State of Minnesota, Dept. of

Commerce, 157 F.3d 1130, 1133 (8th Cir. 1998);

Nichols v. Lewis Grocer, 138 F.3d 563, 565-66

(5th Cir. 1998); Olson v. General Electric

Astrospace, 101 F.3d 947, 956 (3d Cir. 1996);

Pierce v. Commonwealth Life Ins. Co., 40 F.3d

796, 802 n. 8 (6th Cir. 1994). These cases do not

discuss the choice of law issue; they merely take

for granted that the McDonnell-Douglas standard

is substantive for Erie purposes; nor have I

found any illuminating scholarly discussions of

the issue. But I am inclined to think that the

position (or better perhaps the instinct) of

these other circuits is correct.

To describe the McDonnell-Douglas standard as

merely prescribing the order of proof and the

allocation of burdens of production, though

common, see, e.g., Reeves v. Sanderson Plumbing

Products, Inc., 120 S. Ct. 2097, 2106 (2000), and

literally correct, is an invitation to

misunderstanding. Ordinarily, if all a plaintiff

in a discrimination case could show was that he

was qualified for a job (or promotion, or

retention) but was passed over in favor of a

person of a different race (sex, religion, etc.),

his opponent would be entitled to summary

judgment, because no reasonable jury could infer

from these bare facts that it was more likely

than not that the employer’s action was

invidious. Under McDonnell-Douglas, this bare

showing compels summary judgment for the

plaintiff unless the defendant produces evidence

of a noninvidious reason for the action

complained of. Applied to retaliation, the logic

of the McDonnell-Douglas standard would compel

summary judgment for the plaintiff who showed

that after lodging a complaint about

discrimination, he (but not any otherwise

similarly situated employee who did not complain)

was fired or otherwise subjected to an adverse

employment action even though he was performing

his job in a satisfactory manner, unless, again,

the defendant presented a noninvidious reason for

the action. Hiatt v. Rockwell Int’l Corp., supra,

26 F.3d at 767; McEwen v. Delta Air Lines, Inc.,

supra, 919 F.2d at 59. Without the boost given by

McDonnell-Douglas, the plaintiff in such a case

would have to establish, as part of his prima

facie case and thus before the defendant had any

burden of explanation, a causal connection

between the lodging of the complaint and his

being fired.

And so the Illinois court concluded in Clemons

that to follow McDonnell-Douglas in an Illinois

retaliatory-discharge case "would, in essence,

expand the tort of retaliatory discharge by

reducing plaintiff’s burden of proving the

elements of the tort. Because we refuse to expand

the tort of retaliatory discharge, we decline

plaintiff’s invitation to adopt the three-tier

allocation of proof method in retaliatory

discharge cases." 704 N.E.2d at 408. In like vein

the U.S. Supreme Court recently found

"substantive" a New York state law regulating

review of damages awards because while the

statute "contain[ed] a procedural instruction .

. . the State’s objective [wa]s manifestly

substantive." Gasperini v. Center for Humanities,

Inc., 518 U.S. 415, 429 (1996). In rejecting

McDonnell-Douglas for retaliation cases, the

objective of the Illinois court likewise was

"manifestly substantive," namely to avoid

"expand[ing] the tort of retaliatory discharge."

Or as we put it in S.A. Healy Co. v. Milwaukee

Metropolitan Sewerage Dist., 60 F.3d 305, 310

(7th Cir. 1995), "the state’s goals are

substantive--designed to shape conduct outside

the courtroom and not just improve the accuracy

or lower the cost of the judicial process--though

the means are procedural."

A practical way to decide whether a rule of

state law is substantive or procedural for

purposes of the Erie doctrine is to ask whether

the rule is limited to a particular substantive

area or whether it applies across the board. If

the former, it is likely to reflect substantive

policy, to which the federal court should defer,

and if the latter to be a product of purely

procedural concerns that properly may differ

between federal and state courts. E.g., Herremans

v. Carrera Designs, Inc., 157 F.3d 1118, 1123

(7th Cir. 1998); S.A. Healy Co. v. Milwaukee

Metropolitan Sewerage Dist., supra, 60 F.3d at

310. It was on this basis that we suggested in

Harbor Ins. Co. v. Continental Bank Corp., 922

F.2d 357, 364 (7th Cir. 1990), that the doctrine

of "mend the hold," a type of estoppel, was

substantive for Erie purposes insofar as it was

limited to contract cases, just like the parol

evidence rule, which might otherwise be thought

a rule of procedure. "Rules of contract

interpretation, such as the parol evidence and

four-corners rules, are deemed substantive,

because of their effect on the conduct of

contracting parties outside the courtroom, even

though the rules operate through limiting the

kinds of evidence that are admissible." AM Int’l,

Inc. v. Graphic Management Associates, Inc., 44

F.3d 572, 576 (7th Cir. 1995). The McDonnell-

Douglas rule, unlike for example the rule that a

motion for summary judgment need not be supported

by evidence, Celotex Corp. v. Catrett, 477 U.S.

317, 322-24 (1986), is not a general rule of

federal procedure; it is tailored for and limited

to discrimination cases, as we emphasized in Diaz

v. Fort Wayne Foundry Corp., 131 F.3d 711 (7th

Cir. 1997). It is part of the law of

discrimination, which is substantive.

But there is a rather considerable complication.

The McDonnell-Douglas standard that we apply in

most of our retaliation cases is not really the

McDonnell-Douglas standard. The logical

adaptation of McDonnell-Douglas to retaliation,

the adaptation we assumed in Hiatt and McEwen and

that may have led the Supreme Court of Illinois

to reject its use in cases under the Illinois law

of retaliatory discharge, is, as I have

suggested, to entitle the plaintiff to summary

judgment if he shows that after lodging a

complaint about discrimination, only he, not

otherwise similarly situated employees who did

not complain, was subjected to an adverse

employment action even though he was performing

his job in a satisfactory manner. But most cases

in this and other circuits hold that the prima

facie case of retaliation under McDonnell-Douglas

requires more--requires proof of a "causal link"

between the protected expression in which the

plaintiff engaged (as by filing a complaint about

an unlawful act by his employer) and the adverse

employment action of which he is complaining.

E.g., Miller v. American Family Mutual Ins. Co.,

203 F.3d 997, 1007 (7th Cir. 2000); Sauzek v.

Exxon Coal USA, Inc., 202 F.3d 913, 918 (7th Cir.

2000); Byers v. Dallas Morning News, Inc., 209

F.3d 419, 427 (5th Cir. 2000); Jones v.

Washington Metropolitan Area Transit Authority,

205 F.3d 428, 433 (D.C. Cir. 2000).

If this means that the plaintiff must present

evidence that his protected expression caused the

defendant to retaliate, then McDonnell-Douglas

really does regulate just the order of proof and

the allocation of burdens of production and has

no substantive implications, since the plaintiff

would have to prove as much in a retaliation case

if McDonnell-Douglas had never been heard of. But

it would be better then to drop reference to

McDonnell-Douglas altogether, because cases such

as Miller and Sauzek go on to say, very

confusingly as it seems to me, that after the

plaintiff has made his prima facie case, the

defendant can defeat it by producing evidence

that the motive for the adverse employment action

was not retaliatory, unless the plaintiff is able

to come back and show that the alleged

nonretaliatory motive was actually pretextual.

That is McDonnell-Douglas-speak, all right, but

it is out of place. If the plaintiff has produced

evidence that he was fired because of his

protected expression, he has gone beyond

McDonnell-Douglas by producing actual evidence of

unlawful conduct, and that should be enough to

get him to a jury. McDonnell-Douglas is designed

to give the plaintiff a boost when he has no

actual evidence of discrimination (or

retaliation) but just some suspicious

circumstances. If he can prove retaliation with

evidence that his protected expression was in

fact the cause of his being fired, he doesn’t

need McDonnell-Douglas and it gives him nothing.

Further complicating the picture, however, is

disagreement--or maybe sheer muddle--as to what

"causal link" means. If it means, as I have

assumed thus far, and as we held in King v.

Preferred Technical Group, 166 F.3d 887, 892 (7th

Cir. 1999); Johnson v. City of Fort Wayne, 91

F.3d 922, 939 (7th Cir. 1996), and Klein v.

Trustees of Indiana University, 766 F.2d 275, 280

(7th Cir. 1985), that the plaintiff must present

evidence that had it not been for his protected

expression, he would not have been fired (or

suffered whatever other adverse action of which

he complains), then the situation is as I have

described it: McDonnell-Douglas has no proper

role to play in a federal retaliation suit. But

the Fifth and Eleventh Circuits have held that

all that "causal link" signifies in this context

is that the protected expression and the adverse

action "were not wholly unrelated," and that this

means that something less than proof that the

plaintiff wouldn’t have been fired (or suffered

other adverse action) had he not engaged in the

protected expression--less than proof, that is,

of "but for" causation (what philosophers call a

necessary condition)--will suffice to complete

the prima facie case. Long v. Eastfield College,

88 F.3d 300, 305 n. 4 (5th Cir. 1996); Simmons v.

Camden County Board of Education, 757 F.2d 1187,

1189 (11th Cir. 1985). And some of our cases

accept this definition, e.g., Sauzek v. Exxon

Coal USA, Inc., supra, 202 F.3d at 918; Hunt-

Golliday v. Metropolitan Water Reclamation

District, 104 F.3d 1004, 1014 (7th Cir. 1997)--

yet without attempting to distinguish King,

Johnson, and Klein or to explain what "not wholly

unrelated" means. In Sauzek and Hunt-Golliday, we

actually required (despite our "not wholly

unrelated" language) proof of a causal relation,

202 F.3d at 918-19; 104 F.3d at 1014-15, while

Johnson, a case that recites the stricter test,

accepts a mere coincidence in timing--expressly

rejected by Sauzek as sufficient to prove that

the protected expression and the adverse

employment action were "not wholly unrelated,"

202 F.3d at 919--as proof of the required causal

link! 91 F.3d at 939.

Someday we’ll have to decide what the prima

facie case of retaliation is in the Seventh

Circuit. But whatever it is has no relation to

McDonnell-Douglas, which is not about the meaning

of "causal link." The Erie issue, however, may

turn on that meaning. If the requirement of

proving cause is so attenuated as to give the

plaintiff a boost toward winning his case that he

would not have under ordinary rules of pleading

and production, then there is a conflict with

substantive state law, and what the federal

courts inaptly call the McDonnell-Douglas

standard for proving retaliation must give way in

any retaliation case governed by state law. If

the prima facie case of retaliation under federal

law is instead what I am calling the logical

adaptation of McDonnell-Douglas, requiring no

evidence of causation at all, then even more

clearly it must give way in a case governed by

state law. In either event Hiatt and McEwen would

have to be reexamined. Only if the prima facie

case of retaliation under federal law requires

proof of a causal relation in the usual sense,

without attenuation, is there no conflict between

state and federal law, at least in Illinois,

which requires such proof. Only then would the

"McDonnell-Douglas" standard, though thoroughly

misnamed when interpreted to require (unlike

McDonnell-Dougas) proof of causation to make out

a prima facie case, properly apply to state

retaliation cases litigated in federal courts.