Wheeler v. BL Development Corp.

United States Court of Appeals

Fifth Circuit

F I L E D

UNITED STATES COURT OF APPEALS

For the Fifth Circuit June 29, 2005

Charles R. Fulbruge III

Clerk

No. 04-60155

BAYLESS (“BO”) ODELL WHEELER

and DANIEL L. MOORE,

Plaintiffs-Appellants,

VERSUS

BL DEVELOPMENT CORPORATION, D/B/A GRAND CASINO, TUNICA,

Defendant-Appellee.

Appeal from the United States District Court

For the Northern District of Mississippi

Before DAVIS, SMITH, and DeMOSS, Circuit Judges.

DeMOSS, Circuit Judge:

Appellants Bayless “Bo” Wheeler and Daniel L. Moore

(collectively, “Appellants”) filed suit against BL Development

Corporation, d/b/a Grand Casino Tunica (“Grand Casino”), asserting

that they were wrongfully terminated from their employment for

having reported potentially illegal activity on the part of Grand

Casino or, alternatively, on account of their race in contravention

of 42 U.S.C. § 1981. Grand Casino moved for summary judgment,

which was granted by the district court. Appellants timely filed

the instant appeal.

BACKGROUND AND PROCEDURAL HISTORY

Moore first began his employment with Grand Casino in June

2000, when he was hired as Director of Transportation. Wheeler was

hired soon thereafter as a transportation manager in August 2000.

In late September 2001, Jimmy Buckhalter of Grand Casino’s

regulatory affairs department received information from an employee

in the transportation department that a “tire changing” machine,

i.e., a machine used to replace tires on metal wheel rims, had been

“loaned” to Country Ford, a Ford dealership in Southaven,

Mississippi, located approximately 20 miles northwest of Grand

Casino. Buckhalter thereafter notified Karen Sock, Grand Casino’s

General Manager, of the information and requested that he be

permitted to conduct an investigation into the matter. Buckhalter

received authorization to proceed and his investigation began

shortly thereafter in October 2001.

Buckhalter soon learned that Moore’s son, Terry Moore, worked

at Country Ford as a warranty agent and second in charge of the

auto shop. Buckhalter inquired of Wheeler, as a transportation

manager, how the tire changing machine made its way into the hands

of Country Ford. Wheeler allegedly provided differing accounts of

how the equipment was loaned to Country Ford.1 Buckhalter

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Wheeler first admitted loaning the tire changing machine to

Country Ford without authorization and without filling out any

paperwork memorializing the loan. He subsequently stated that the

equipment was broken and that he had reached an arrangement with

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subsequently obtained the assistance of Daniel Moore, the Director

of Transportation, to reconcile Wheeler’s varying accounts and to

contact his son Terry at Country Ford to uncover whether Terry had

any additional information regarding the unauthorized loan. After

several meetings between Buckhalter’s investigative team and

Appellants, it was determined that both Moore and Wheeler were to

be suspended. Seven days later, Sock decided to terminate each of

Moore’s and Wheeler’s employment with Grand Casino for “violation

of company policy.”

Meanwhile, at about the same time in October 2001, Grand

Casino announced a new Executive Dry Cleaning Plan (the “Plan”),

which offered Grand Casino executives up to $120 per month of free

dry cleaning services.2 Believing the arrangement between the dry

cleaner and Grand Casino to be an illegal kickback, Appellants

allegedly reported the Plan to Buckhalter prior to his

investigation into the loaning of the tire changing machine.

Appellants readily admit that after initially being suspended by

Grand Casino, but before they were terminated, they also sent a

Country Ford whereby Wheeler would loan the machine to Country Ford

if they could, in return, fix it. It was discovered, however, that

Wheeler could not identify what part of the machine was broken nor

did the Country Ford representative with whom Wheeler allegedly

made the arrangement have any knowledge of needing to repair the

machine. In fact, the Country Ford representative revealed that

the dealership did not have the capability to fix a tire changing

machine.

2

The arrangement between the dry cleaner and Grand Casino was

subsequently amended to offer executives 50% off all dry cleaning

instead of the $120 in free monthly services.

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memo to the Mississippi Gaming Commission detailing how they

perceived the Plan to constitute illegal activity. The Gaming

Commission conducted an investigation and ultimately concluded that

the Plan was not criminally illegal.

Upon being terminated, Appellants filed suit against Grand

Casino, alleging that their termination was the result of their

reporting to Buckhalter their belief that the Plan was illegal, and

therefore was in violation of a public policy-based exception to

Mississippi’s employment at will doctrine. Alternatively,

Appellants maintained that their termination by black casino

executives occurred because Appellants are white, in violation of

42 U.S.C. § 1981. Grand Casino moved for summary judgment, arguing

that there existed no genuine issue of fact under which Appellants

could recover for either claim.

The district court granted Grand Casino’s motion, concluding

that the relevant exception to the employment at will doctrine

provides Appellants protection from subsequent termination only if

the activity reported was “criminal,” not merely illegal. Having

found that the reported activity was neither criminal nor illegal,

the district court concluded that Appellants were precluded from

recovering under that claim. In addition, the district court found

that Appellants had not come forward with evidence establishing a

prima facie case of racial discrimination, most notably proof that

Grand Casino replaced Appellants with employees outside Appellants’

protected class. Appellants timely filed the instant appeal.

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STANDARD OF REVIEW

This Court reviews grants of summary judgment de novo,

applying the same standard as the district court. Tango Transp. v.

Healthcare Fin. Servs. LLC, 322 F.3d 888, 890 (5th Cir. 2003).

Summary judgment is appropriate if no genuine issue of material

fact exists and the moving party is entitled to judgment as a

matter of law. FED. R. CIV. P. 56(c). The Court views the evidence

in the light most favorable to the non-movant. Coleman v. Houston

Indep. Sch. Dist., 113 F.3d 528, 533 (5th Cir. 1997). The non-

movant must go beyond the pleadings and come forward with specific

facts indicating a genuine issue for trial to avoid summary

judgment. Celotex Corp. v. Catrett, 477 U.S. 317, 324 (1986). A

genuine issue of material fact exists when the evidence is such

that a reasonable jury could return a verdict for the non-movant.

Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986). Summary

judgment is appropriate, however, if the non-movant “fails to make

a showing sufficient to establish the existence of an element

essential to that party’s case.” Celotex, 477 U.S. at 322.

DISCUSSION

On appeal, Appellants maintain the district court erred on two

grounds when it granted summary judgment in favor of Grand Casino.

First, Appellants argue the district court misapplied Mississippi

law in denying them relief for reporting what they believed to be

illegal activity. Second, Appellants contend the district court

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erroneously concluded that they did not provide sufficient evidence

establishing a prima facie case of racial discrimination.

In response, Grand Casino argues the district court correctly

determined that the activity reported by Appellants did not

actually constitute a crime and therefore summary judgment was

appropriate under Mississippi law. Moreover, Grand Casino

maintains the only competent evidence of racial discrimination

offered by Appellants is irrelevant because the black employee

allegedly subjected to disparate treatment was not a “similarly

situated” employee under “nearly identical” circumstances.

I. Whether the exception to Mississippi’s employment at will

doctrine requires the conduct reported to actually be criminal

in nature.

Mississippi has adhered to the employment at will doctrine

since 1858. Perry v. Sears, Roebuck & Co., 508 So. 2d 1086, 1088

(Miss. 1987). Under this common law rule, the employment contract

between employer and employee may be terminated by either party

with or without justification. HeartSouth, PLLC v. Boyd, 865 So.

2d 1095, 1108 (Miss. 2003) (citation omitted). In McArn v. Allied

Bruce-Terminix Co., Inc., 626 So. 2d 603 (Miss. 1993), the

Mississippi Supreme Court carved out a public policy exception to

this general rule. In McArn, the employee worked for a pest

control service company. Id. at 604. McArn was ultimately

terminated and claimed that he was wrongfully discharged because he

had reported to customers and a state agency that the work being

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performed by his former employer was inadequate or, in some cases,

non-existent. Id. at 605-06. In seeking to have the Mississippi

Supreme Court create a narrow public policy exception to the common

law rule, McArn asserted that he was simply reporting conduct that

was criminal under Mississippi law. Id. at 606 (citing MISS. CODE

ANN. §§ 97-19-39 and 69-23-19 (1972) (denoting as a felony the

receipt of money under false pretense and as a misdemeanor the

violation of state pest control regulations)). The Mississippi

Supreme Court agreed with McArn, concluding that “an employee who

is discharged for reporting illegal acts of his employer to the

employer or anyone else is not barred by the employment at will

doctrine from bringing action in tort for damages against his

employer.” Id. at 607 (determining that the exception applies even

where there is a “‘privately made law’ governing the employment

relationship”).

Appellants maintain that although the activity they reported

involving the Plan was ultimately neither illegal nor criminal,

McArn simply requires that they reasonably believed the activity to

be criminally illegal. Appellants rely on the Mississippi Supreme

Court’s decision in Willard v. Paracelsus Health Care Corp., 681

So. 2d 539 (Miss. 1996) (“Willard I”), in support of their

position. In Willard I, two hospital workers were terminated after

reporting to their superiors that the hospital administrator was

receiving checks personally made out to her in alleged violation of

hospital policy. Id. at 540. After a jury trial, judgment was

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entered upon jury verdicts in favor of the former hospital

employees. Id. The employees appealed, however, arguing that they

were entitled to a jury instruction on retaliatory discharge and,

if found by the jury, consideration of an award for punitive

damages. Id. at 540-41. The Mississippi Supreme Court ruled the

trial court erred by not giving such an instruction and remanded

the case to consider whether the hospital committed the independent

tort of retaliatory discharge and, if so, to consider whether

punitive damages were recoverable. Id. at 543.

Appellants specifically rely on the court’s statement that

“[d]ischarge in retaliation for an employee’s good faith effort to

protect the employer from wrongdoing constitutes an independent

tort and may support punitive damages.” Id. (emphasis added).

Appellants argue this statement can be interpreted as not requiring

a plaintiff to prove that the alleged illegal act reported is

actually illegal, only that he had a good faith belief of the same.

Appellants’ argument is unpersuasive. As an initial matter,

the issue in Willard I was not whether the reported activity was

reasonably believed to be illegal. Rather, the activity at issue

in Willard I involved a cut-and-dried case of forgery. The court

did not engage in any discussion of whether the conduct reported

was criminally illegal.3 Therefore, Appellants’ attempt to equate

3

In fact, by its own terms, the only issue the Mississippi

Supreme Court was addressing was whether an employee’s reporting of

illegal activity is an independent tort giving rise to punitive

damages – a question expressly left unanswered in McArn. Willard

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an employee’s “good faith effort” in reporting illegal activity,

which is protected under the common law exception, with a good

faith belief that illegal activity is taking place is misplaced.

Appellants further rely on a subsequent Mississippi Supreme

Court ruling, Paracelsus Health Care Corp. v. Willard, 754 So. 2d

437 (Miss. 2000) (“Willard II”), in which the court again addressed

the scope of its previous decision in McArn. Appellants

specifically cite the court’s statement that “neither McArn or

Willard I . . . suggest that the plaintiff must first prove that a

crime was committed” for the proposition that a plaintiff merely

needs to have a good faith belief that the reported conduct is

illegal to benefit from the public policy exception. Id. at 443.

Again, Appellants’ argument is unpersuasive. In Drake v.

Advance Construction Service, Inc., 117 F.3d 203 (5th Cir. 1997),

this Court explored the boundaries of McArn’s public policy

exception. The employee in Drake was retained as a quality control

manager of a construction site. Id. at 203. After reporting to his

superiors certain deficiencies in the way the job was being

completed, he was ordered not to include such deficiencies in his

formal reports to the Army Corps of Engineers (the “Corps”). Id.

at 204. The employee decided otherwise and included the observed

deficiencies in the quality control reports he submitted to the

Corps. Id. at 203-04. After being terminated shortly thereafter,

I, 681 So. 2d at 543; see also McArn, 626 So. 2d at 608.

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the employee filed suit against his employer, alleging that he was

wrongfully discharged under the McArn public policy exception for

refusing to commit an illegal act. Id. at 204. The district court

granted summary judgment in favor of the employer, finding that the

“[d]eliberate failure to note a deficiency in the placement of

[rock], while perhaps unprofessional or immoral, is not an illegal

act.” Id. On appeal, this Court discussed whether the submitting

of those particular false reports was violative of 18 U.S.C. §

1001. Concluding that a genuine issue of material fact existed as

to whether such reporting would have constituted an illegal

activity, this Court reversed and remanded the case to the district

court. Id. at 205-06.

Importantly, the Drake Court did not conclude that the

employee was protected under McArn simply because he reasonably

believed what he was asked to do by his superiors was criminal.

Instead, remand was ordered to determine the legality of such

action, lending credence to Grand Casino’s position that the act

itself must be criminal to implicate the exception and rendering

the subjective intent or belief of the plaintiff irrelevant.

Clearly, as the parties concede in the instant case, the Plan did

not constitute any form of criminally illegal activity; therefore,

McArn’s “narrow public policy exception” is not applicable in this

instance. To assist Appellants in broadening the scope of what the

Mississippi Supreme Court and this Court have continually

recognized as a “narrow public policy exception,” see Drake, 117

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F.3d at 204; Boyd, 865 So. 2d at 1108, would serve to envelope a

much wider class of activities – a broadening that is at odds with

the intent of the Mississippi Supreme Court when it first created

the exception.4

In sum, the district court did not err when it determined that

Appellants are precluded from recovering under the public policy

exception because they have failed to come forth with evidence

establishing that the Plan itself constituted criminal activity.

II. Whether there was sufficient evidence supporting Appellants’

4

This Court has also considered whether the violation of a

federal regulation (OSHA) was tantamount to criminally illegal

activity under the state criminal code, and thus subject to the

McArn exception. Howell v. Operations Mgmt. Int’l, Inc., No. 03-

60238, 2003 WL 22303057 (5th Cir. Oct. 8, 2003) (unpublished

opinion). Specifically, the Howell court ruled:

Although Mississippi law generally permits employers

to terminate their at-will employees for any reason, the

Mississippi Supreme Court created a “narrow public policy

exception” to that rule in McArn v. Allied Bruce-Terminix

Co. Inc., 626 So. 2d 603, 607 (1993). The exception

creates a tort action in favor of an at-will employee who

is discharged for “refus[ing] to participate in an

illegal act” or for “reporting illegal acts of his

employer.” Id. McArn itself involved a criminal act, and

the Mississippi Supreme Court’s statement of the issue on

appeal was phrased in terms of “participat[ion] in

criminal activity.” Id. at 604, 606. Howell did not

assert before the district court that his OSHA

complaints, had they found been found meritorious, would

have amounted to reports of criminal acts. Howell has not

shown us, and we have not found, any Mississippi cases

indicating that the McArn exception applies to regulatory

violations of the sort involved in Howell's OSHA

complaints. Our own court’s prior cases involving the

McArn exception have involved criminal illegality.

Id. at *3 (emphases added and footnotes omitted). Again, this

Court focused on the criminal illegality of the act itself, without

regard to what the plaintiff reasonably believed to be illegal.

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race discrimination claims.

In its Memorandum Opinion, the district court found that

Appellants’ summary judgment evidence failed to establish a prima

facie case of racial discrimination. On appeal, Appellants

maintain they produced sufficient evidence of discrimination,

including evidence that they were replaced by someone of a

different race and that they were treated less favorably than a

similarly situated person of a different race.

Under the burden-shifting framework established in McDonnell

Douglas Corp. v. Green, 411 U.S. 792 (1973), the plaintiff may

establish a prima facie case of discrimination using circumstantial

evidence. Laxton v. Gap Inc., 333 F.3d 572, 578 (5th Cir. 2003).

To establish a prima facie case of discrimination under § 1981,

Appellants must establish that they: (1) are members of a protected

group; (2) were qualified for the position held; (3) were

discharged from the position; and (4) were replaced by persons

outside of the protected group. Singh v. Shoney’s, Inc., 64 F.3d

217, 219 (5th Cir. 1995). The burden then shifts to the employer

to demonstrate a legitimate, non-discriminatory reason for the

termination. Laxton, 333 F.3d at 578. If the employer is

successful in producing such a reason, the presumption of

discrimination dissipates, leaving the plaintiff with the ultimate

burden of establishing, by a preponderance of the evidence, that

the employer discriminated against the employee because of the

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employee’s protected status. Id.

The district court concluded that summary judgment was proper

as to Appellants’ § 1981 claims because Appellants were unable to

satisfy the fourth element of the four-prong test, i.e., that they

were replaced by a person outside the protected group.5 This Court

has recognized that a plaintiff may make this showing by

demonstrating either that he was replaced by someone outside the

protected class or that other similarly situated employees outside

the protected class were treated more favorably. Okoye v. Univ. of

Tex. Houston Health Sci. Ctr., 245 F.3d 507, 512-13 (5th Cir.

2001).

Appellants maintain they established the fourth prong by

presenting evidence that Richard Simms, a black male and the former

Vice President of Resorts, assumed their duties. In addition, as

evidence that they were treated differently than other similarly

situated employees, Appellants argue Grand Casino did not take

disciplinary action against Debra Byrd, a black female manager, who

was found to have hidden Grand Casino property from auditors.

With regard to Appellants’ first contention, the district

court found that shortly after Appellants were terminated, Grand

5

The district court also found that, even assuming Appellants

did come forth with evidence establishing a prima facie case of

discrimination, they nevertheless failed to rebut Grand Casino’s

legitimate and non-discriminatory reason for discharging them.

Clearly, under McDonnell Douglas, we need not reach this second

issue if we conclude Appellants did not first establish a prima

facie case of discrimination. See Byers v. Dallas Morning News,

Inc., 209 F.3d 419, 427 (5th Cir. 2000).

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Casino engaged in a departmental restructuring. As a result of

this restructuring, Simms assumed the position of Vice President of

Security — a position neither Moore nor Wheeler previously held.

Moreover, there is record evidence establishing that Appellants’

previous positions were formally assumed by white males after the

restructuring. Specifically, Moore’s position as “Director of

Transportation” was filled by Chris Tatum as the “Director of

Resort Operations,” and Leroy Harrison assumed the position of

“Transportation Manager,” the position formerly held by Wheeler.

Both Tatum and Harrison are white. Based on these facts, the

district court properly concluded that Appellants were not replaced

with persons outside the protected class.

As for Appellants’ second argument regarding dissimilar

treatment for similarly situated employees, the district court

determined that Byrd, a black Grand Casino manager, was ultimately

not terminated because she was truthful in her statements during

the course of the investigation into her actions. Conversely, the

district court found it relevant that Wheeler was discharged for

making repeated, untruthful statements during the company’s

investigation into his unauthorized loaning out of equipment.

To establish disparate treatment, a plaintiff must demonstrate

that a “similarly situated” employee under “nearly identical”

circumstances, was treated differently. Mayberry v. Vought

Aircraft Co., 55 F.3d 1086, 1090 (5th Cir. 1995). Appellants argue

that Wheeler, Moore, and Byrd all had the same supervisor; Moore

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and Byrd were both directors; and all three were accused of

removing company assets at relatively the same time. Appellants

offer as further proof of their employment discrimination claim the

fact that the decision makers responsible for terminating

Appellants are all black (Karen Sock, Richard Simms, and Jimmy

Buckhalter).

In response, Grand Casino notes that Byrd was found to have

hidden two boxes of shampoo and hair coloring in her car, the value

of which is “dramatically less” than that of a several thousand

dollar tire changing machine.6 Moreover, Grand Casino observes

that Byrd readily admitted her conduct during the investigation,

whereas Appellants were found to have been less than truthful

throughout the investigation into their activities. Grand Casino

also argues that the record evidence reflects the fact that white

males other than Appellants, who had been found to have removed

company assets without permission, received disciplinary actions

short of termination.

In sum, Appellants have not come forward with sufficient

evidence establishing that their termination was racially

motivated. Appellants have not established that they were replaced

by non-white employees nor have they demonstrated that their

6

Grand Casino maintains the difference in the value and nature

of the property allegedly removed by Appellants and Byrd

necessarily requires a finding that the circumstances in each case

are not “nearly identical” for purposes of this panel’s disparate

treatment inquiry.

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discharge was the result of being treated any differently than

other non-white similarly situated employees.

CONCLUSION

Having carefully reviewed the entire record of this case, and

having fully considered the parties’ respective briefing and

arguments, we conclude the district court properly granted summary

judgment in favor of Grand Casino because Appellants failed to come

forward with evidence establishing: (1) the Plan adopted by Grand

Casino constituted criminally illegal activity; or (2) a prima

facie case of racial discrimination. Accordingly, the district

court’s granting of summary judgment is AFFIRMED.

AFFIRMED.

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