Byrd v. Quantum Health Resources CV-95-432-SD 07/16/97 UNITED STATES DISTRICT COURT FOR THE DISTRICT OF NEW HAMPSHIRE

M. Adele Byrd

v. Civil No. 95-432-SD

Quantum Health Resources Corp., d/b/a Quantum Health Resources

O R D E R

Plaintiff Adele Byrd brings this civil action against

defendant Quantum Health Resources Corporation, d/b/a Quantum

Health Resources, claiming that (1) Quantum treated her

unfavorably in the conditions of her employment and later

terminated such employment on account of her gender in violation

of Title VII of the Civil Rights Act of 1964, 42 U.S.C. § 2000e,

et seg.; (2) Quantum breached certain express and implied terms

of the employment contract between the parties; and (3) Quantum

defamed her by publishing an unfavorable assessment of her job

performance.

Background

Quantum is a national provider of home therapies and support

services to long-term, chronically ill patients. In 1992,

Quantum hired plaintiff Byrd as a North East Area Marketing

Representative. Byrd's job was to solicit patient referrals from health care providers in her assigned territory. Byrd's

supervisor was Virginia Kraus. In December 1993 Kraus completed

a "Performance Appraisal" of Byrd's work. The evaluation was

favorable, lauding Byrd for "[c]learly understand[ing] purpose,

objectives, practices and procedures of Quantum" and for

" [r]ecogniz[ing] the importance of guality in providing a

competitive edge."

In August 1993 David Hayes took over as Byrd's supervisor.

In November 1993 Hayes informed Byrd that some of her assigned

territory was being reassigned to Jayne Poirier, a newly hired

marketing representative. The decision to reassign some of

Byrd's territory to Poirier appears to have generated some ill

will between Byrd and Hayes. To compensate her for the lost

territory, Hayes promised to pay Byrd commissions on patient

referrals from her old territory for a three-month period.

In January 1994 Hayes sent Byrd a memo informing her that

she would be reguired to meet certain performance expectations or

risk losing her position at Quantum. In March 1994 Hayes

prepared a report for his supervisor concerning the marketing

representatives for the northeast area. In discussing Byrd, the

memo stated, "Adele Byrd: Behind in paperwork; attitude needs

improvement; will make decision on continued employment with QHR

by 3/21/94." Through administrative error, the memo was mailed

2 to all of Byrd's co-workers. At the end of March 1994 Hayes

terminated Byrd.

Discussion

Title VII

Plaintiff brings her claim under Title VII of the Civil

Rights Act of 1964, 42 U.S.C. § 2000e-2(a), claiming she was the

subject of unlawful sex discrimination. Title VII prohibits

discrimination in employment "against any individual with respect

to his compensation, terms, conditions, or privileges of

employment, because of such individual's race, color, religion,

sex, or national origin." 42 U.S.C. § 2000e-2(a) (1) . Her Title

VII claim can be separated into two parts. First, she claims

Quantum treated her unfavorably with respect to the conditions

and terms of her employment on account of her gender. Second,

she claims Quantum terminated her employment because she is a

woman.

Byrd's claim that Quantum unlawfully discriminated against

her with regard to the terms of employment is clearly without

merit. Byrd claims that her supervisor Hayes and one of the

other female North East Area Marketing Representatives, Jane

Poirier, were having a sexual relationship, and for that reason

Hayes treated Poirier more favorably than Byrd in regard to the

3 conditions and terms of employment. Specifically, Byrd alleges

that Hayes reassigned some of Byrd's more lucrative sales

territory to Poirier in return for her amorous affections. Even

if these factual allegations are true, Byrd has not set forth a

cognizable claim for sex discrimination. Despite some contrary

authority, see King v. Palmer,

(D.C. Cir. 1985)

(implicitly recognizing Title VII action premised on voluntary

sexual relationship), this court believes that Title VII's

prohibition against sex discrimination only proscribes

distinctions based on gender, not on sexual affiliation.

DeCintio v. Westchester County Medical,

, 306-07 (2d

Cir. 1986). Generally, Title VII prohibits discrimination based

on immutable characteristics such as "race, color, religion, sex

[and] national origin." Classifications defined by immutable

characteristics are invidious and unjust because they deprive a

person of entitlements and opportunities on the basis of a

characteristic the person cannot change. Such classifications

result from power exercised by a dominant group for no other

reason than the perpetuation of hierarchy and oppression. Gender

is a highly visible immutable characteristic that has

historically formed the basis for illegitimate discrimination.

Frontiero v. Richardson,

(1973). Thus, Title VII

was intended to "strike at the entire spectrum of disparate

4 treatment of men and women." Sproqis v. United Air Lines,

(7th Cir.), cert, denied,

(1971).

In contrast, workplace favoritism for the employer's sexual

partner disadvantages both males and females who are not sexually

involved with the employer. Membership in the disadvantaged

group is defined by voluntary association rather than an

immutable characteristic. Title VII was not intended to

dismantle a system of classifications premised on voluntary

sexual associations. Hayes's preferential treatment of his

paramour, Poirier, discriminated against Byrd based on her sexual

affiliation rather than her gender, and is therefore not

actionable under Title VII.

Byrd's second Title VII claim, that Quantum terminated her

for gender-based reasons, is also meritless. The central point

of contention between the parties is whether Quantum terminated

Byrd for discriminatory reasons based on her gender or, rather,

for permissible nondiscriminatory reasons. Quantum claims that

Byrd was terminated for poor performance, and offers evidence

that she failed Quantum's performance expectations of its

marketing representatives. Quantum's stated primary objective

for its marketing representatives was obtaining patient

referrals. In 1993, Quantum set a goal for its marketing

representatives to obtain 30 referrals in a year. Byrd obtained

5 only 16 referrals in 1993, placing her at 33rd in rank out of 42

other Quantum marketing representatives. At the end of 1993

Hayes reviewed the performance of the North East Area Marketing

Representatives and, of them, Byrd had the lowest number of

referrals. In mid-January 1994 Hayes provided Byrd with a

written memorandum regarding the level of performance expected of

her. The letter provided:

Your efforts in developing your assigned territory are commendable but have not generated significant referrals to date. In 1993 your Chronicare referrals totaled 16 patients against a plan of 30 Chronicare patients for the 12 month period. For 1994, the commission plan has even higher expectations and reguires >40 Chronicare patients for the year.

During the first two months of this year, you will be reguired to produce no less than 7 patient referrals which must be cleared for insurance and shipped. This number is based on an expected of >40 new chronic patient gains in 1994 to gualify for annuity payment.

Defendant's Memorandum in Opposition to Motion for Summary

Judgment at 7 (guoting Byrd Deposition, Exhibit 11). In

addition, the letter reguested Byrd to submit to Hayes a written

improvement plan detailing long-range goals and weekly agendas.

The letter ended, "failure to improve overall patient gains and

meet the performance guidelines specified above will result in

disciplinary action and/or termination." Id.

6 Byrd failed to either obtain the required seven referrals or

submit the written improvement plan. In a monthly sales report

prepared by Hayes, he stated that Byrd's performance provided

grounds to question her continued employment with Quantum. The

report read:

II. Personnel Issues

A). Exemplary Performance: Kay Barry & Susan Martin - 6 new Chronicare referrals.

Problems: Adelle (sic) Byrd - 60 day program ends 3/15/94 - has five new referrals 1994 needs two more shipped by 3/15/94; Behind in paperwork; attitude needs improvement; will made a decision on continued employment with QHR by 3/21/94 .

Defendant's Memo at 8 (quoting Byrd Deposition, Exhibit 13).

When Byrd was terminated, Hayes provided her written notice of

the grounds or reasons for her termination, citing her failure to

obtain the required seven referrals:

Adele, I have reviewed your progress to date against the performance program which was documented in my memo to you dated January 13, 1994 and have determined that you have not successfully met the minimum criteria established for your continued employment with Quantum.

Please recall you were to have achieved a minimum of seven (7) Chronicare™ referrals (cleared and shipped) during the first two months of '94, to date you have five (5). In addition, you were to have completed a detailed business plan for your sales area with weekly and monthly plans to achieve this annual plan. These plans have not been completed adequately. Both of these

7 objectives were critical elements of the performance program and your results, to date, are unsatisfactory.

Therefore, your employment will be terminated effective 3/23/94.

Defendant's Memorandum at 9 (quoting Byrd Deposition, Exhibit

14) .

This evidence substantiates Quantum's claim that the reason

for terminating Byrd's employment was poor performance rather

than the fact of her gender. As evidence that poor performance

was not the reason for her termination, Byrd offers a favorable

employee performance appraisal written by her previous

supervisor, Virginia Kraus, in December 1993, three months prior

to her termination. In evaluating the significance of this

evidence, it must be remembered that the primary focus remains on

lawfulness of the defendant's subjective motivation rather than

the objective accuracy of the defendant's judgments and

evaluations. Menard v. First Sec. Services Corp.,

(1st Cir. 1988) (plaintiff's "proffered evidence does little

but dispute the objective correctness of [defendant's] decision"

to terminate plaintiff). There is no discrimination if Hayes's

subjective motivation for terminating Byrd was poor performance,

even if his unfavorable evaluation of her performance was

objectively erroneous or unfair. Kraus's favorable evaluation of

Byrd's performance merely indicates that Hayes may have been objectively harsh or unfair in assessing Byrd's work performance.

Kraus's evaluation, however, provides no insight into Hayes's

subjective state of mind and motive for terminating Byrd. In

sum, a favorable evaluation of Byrd's performance completed four

months prior to her termination by a former supervisor cast no

light on the reasons why Hayes terminated Byrd.

Next, plaintiff offers a cryptic handwritten office memo

that insinuates Hayes was asserting poor performance as a pretext

to firing Byrd for other reasons. The memo reads:

12-30-93 Conversation with David Hayes re Adele Byrd - possible hostile suit against QHR - improper handling of her performance. She has had surgery for carpal tunnel syndrome - has not ret'd voice mails left by V. Kraus - advise she call [at] home today - got recorder - I faxed Firemen's the 1st report & asked for status - told Kraus to fedex letter to Byrd - Hayes seems very concerned & would like her termed for poor performance.

Plaintiff's Objection to Motion for Summary Judgment and

Memorandum of Law in Support Thereof, Exhibit B. According to

Byrd, this memo indicates that Quantum's asserted reasons for her

termination are a pretext.

The First Circuit has made clear that a plaintiff cannot

necessarily meet the burden of showing discrimination solely by

relying on proof that the defendant's proffered nondiscriminatory

reasons for the adverse action are pretextual. Smith v. Stratus

Computer, Inc.,

(1st Cir. 1994). The plaintiff has the burden of proving that the defendant's true motivation

underneath the pretext was discriminatory. St. Mary's Honor

Center v. Hicks,

(1993). Under some

circumstances, rejection of the defendant's proffered reason as

pretextual may give rise to an inference that the true motivation

was discriminatory.

However, this is not such a case

because, while the office memo may indicate that poor performance

was a pretext, there is no indication that unlawful

discriminatory animus lurked beneath the pretext. Read in a

light most favorable to plaintiff, the memo may suggest that

Hayes wanted Byrd terminated under the pretext of poor

performance. But the memo suggests that the true reason was

Hayes's concern about a "possible hostile suit against

[Quantum]," rather than Byrd's gender.

In sum, there is not a shred of evidence supporting Byrd's

claim that Quantum terminated her because of her gender. Quantum

has produced competent evidence that Byrd was terminated for the

permissible, nondiscriminatory reason of poor performance. In

addition. Quantum replaced Byrd with another woman. Byrd is left

with little more than allegations that she is in a protected

class and was terminated from employment. This is insufficient

to survive a motion for summary judgment.

10 Breach of Contract

Next, Byrd claims that Quantum terminated her in violation

of the covenant of good faith and fair dealing that inheres in

all contracts. Byrd alleges that Quantum terminated her in bad

faith in order to deprive her of commissions to which she

otherwise would have been entitled. Quantum's commission policy

states that " [c]ommissions . . . will only be paid to individuals

employed at the time of disbursement." Defendant's Memo, Exhibit

1, "Offer Description". Byrd claims Quantum terminated her five

days prior to the date on which commissions were to be disbursed

in order to avoid any contractual obligation to pay her

commissions.

The "implied covenant of good faith and fair dealing is not

a catch-all cause of action aimed at eradicating all taint of the

unethical from contract dealing." Carriage Hill Health Care v.

Havden, No. 96-101-SD, slip op. at 6 (D.N.H. Apr. 30, 1997).

Rather, the covenant arises in response to "the particular

problem raised by a promise subject to such a degree of

discretion that its practical benefit could seemingly be

withheld." Centronics Corp. v. Genicom Corp.,

,

(1989). Justice Souter, writing for the New

Hampshire Supreme Court, defined the scope of the covenant as

follows:

11 [U]nder an agreement that appears by word or silence to invest one party with a degree of discretion in performance sufficient to deprive another party of a substantial proportion of the agreement's value, the parties' intent to be bound by an enforceable contract raises an implied obligation of good faith to observe reasonable limits in exercising that discretion, consistent with the parties' purpose or purposes in contracting.

,

.

Here, Quantum's promise to pay commissions is subject to

their unfettered discretion under the employment contract to

terminate employees at any time. Under Quantum's compensation

policy, commissions are not payable to employees who are

terminated before the date of commission disbursement, and under

the employment contract. Quantum retains the discretion to

terminate employees "at any time." Defendant's Memorandum,

Exhibit 1, "Offer Description." Quantum may avoid paying

commissions by exercising its discretion to terminate an employee

before commissions are to be disbursed. This scheme renders

Quantum's promise to pay commissions entirely illusory, and a

faithful employee may be denied the fruits of his labor by an

abusive exercise of Quantum's discretion to terminate employees

at any time. This is clearly, in the words of Justice Souter, "a

promise subject to such a degree of discretion that its practical

benefit could seemingly be withheld."

,

. For that reason. Quantum's discretion to terminate "at any

12 time" is circumscribed by the covenant of good faith, imposing an

obligation to observe reasonable limits in exercising that

discretion. It is a guestion for the jury whether Quantum

exceeded reasonable limits in terminating Byrd five days before

her commissions were to be disbursed.

Next, Byrd claims that Quantum breached its promise to pay

her commissions for a ninety-day period for referrals from her

old territory that was reassigned to Poirier. At a November 1993

meeting with Hayes and Kraus, Byrd objected to the reassignment

of a portion of her sales territory to Poirier. In answer to her

objection, Hayes promised that Quantum would pay her commissions

for referrals from her old territory for a ninety-day period. At

that time, Byrd understood that the ninety-day period would begin

in January when the reassignment became effective. At the end of

November, Hayes wrote Byrd a memo regarding the reassignment of

her territory which explained that the ninety-day period would

begin in December. Quantum paid Byrd commissions for a ninety-

day period beginning December 1 and ending in February. However,

Byrd claims the ninety-day period was to begin January 1 and end

in March.

Quantum argues that Hayes's November memo informing Byrd

that the period would begin in December conclusively resolves the

issue, and Byrd's understanding that the period would begin in

13 January is "wishful thinking," with no significance in

interpreting the contract between the parties. However, the

contract between the parties was formed at the November meeting

when Hayes orally promised to pay Byrd's commissions for a

ninety-day period. At that time, the terms of the contract were

ambiguous with regard to when the ninety-day period would begin.

Hayes's subseguent memo merely expresses his subjective

understanding, or "wishful thinking, " that the ninety-day period

would begin in December. Hayes's subjective understanding of the

ambiguous contract term is no more controlling in interpretation

than Byrd's contrary subjective understanding. In fact, under

the objective theory of contracts, which is controlling in New

Hampshire, Echo Consulting Services v. North Conway Bank,

,

(1995), neither party's

subjective understanding of an ambiguous contract term is

entitled to significant weight. Rather, "the standard is the

meaning that the party making the manifestation should reasonably

expect the other party to give it--the standard of reasonable

expectation." Calamari and Peri ll o, Contracts § 3-10, at 118 (2d ed.

1977). When Hayes told Byrd in the November meeting that Quantum

would pay her commissions for a ninety-day period, he should have

reasonably expected Byrd would understand the ninety-day period

to cover January to March. Both parties understood that the

14 ninety days of commissions was additional compensation to Byrd

for her loss of territory. Since the reassignment of territory

from Byrd to Poirier became effective in January, a promise to

pay commissions for December referrals would not provide Byrd

with additional compensation because she would be entitled to

December commissions in any event. Rather, a reasonable person

who knew that the promise was intended to provide Byrd with

additional compensation would understand the ninety-day period to

begin in January when the reassignment of territory became

effective.

In sum, Byrd has made sufficient showing that Quantum

breached the contract between the parties.

Defamation

Next, Byrd claims that Hayes defamed her by publishing an

office memorandum to all Quantum's North East Area Marketing

Representatives that stated, "Adele Byrd: Behind in paperwork;

attitude needs improvement; will make decision on continued

employment with QHR by 3/21/94." Defendant's Memo, supra, at 8.

The R estatement defines defamation as " (a) false and

defamatory statement concerning another; (b) an unprivileged

publication to a third party; (c) fault amounting to at least

negligence on the part of the publisher; and (d) either

15 actionability ability of the statement irrespective of special

harm or the existence if special harm caused by the publication.

Defendant's Memorandum at 21-22 (citing R e s t a t e m e n t (S e c o n d ) of T orts

§ 558 (1977)).

Quantum claims that the statement consists of protected

opinion, as opposed to defamatory facts. In Gertz v. Robert

Welch, Inc.,

(1974), the Supreme Court said "[u]nde

the First Amendment there is no such thing as a false idea,"

, precluding a finding that a statement of opinion is

defamatory. However, the R estatement notes that " [a] defamatory

communication may consist of a statement in the form of an

opinion, but a statement of this nature is actionable only if it

implies the allegation of undisclosed defamatory facts as the

basis for the opinion." Restatement, supra, § 566, at 170. A

statement of discharge from employment generally implies no more

than an opinion or a subjective evaluation of the discharged

employee. Davis v. Ross,

(1985). However, the

publication of discharge may contain, by implication, an

underlying objective evaluation of the employee, and thus may be

considered defamatory under section 566 of the Restatement.

Hayes's memo announcing an intent to consider discharging

Byrd is not purely opinion, but contains, both expressly and by

implication, underlying objective evaluations as bases for the opinions expressed. First, the memo expressly states that one

basis for terminating Byrd is that she is "behind in her

paperwork," which is clearly an objective evaluation of her

performance. Second, the statement that her "attitude needs

improvement" implies the fact that she has displayed a poor

attitude in the performance of her duties as a Quantum employee.

Clearly, if Hayes told one of Byrd's prospective employers that

Byrd's "attitude needs improvement," that employer would

understand the statement to imply an objective evaluation of her

job performance at Quantum. Thus, Hayes's memo is not protected

opinion.

Quantum next argues that the statements of fact in the memo

are true and, for that reason, cannot be defamatory. Since truth

is a defense to defamation. Quantum bears the burden of proof on

the issue. Quantum argues that the statement in the memo, "will

make a decision on continued employment with QHR by 3/21/94," is

demonstratively true because Hayes did in fact terminate Byrd by

that date. This argument misses the point. When an opinion is

held to be defamatory because it implies an underlying objective

evaluation, truth value must attach to the objective evaluation,

not to the opinion. The issue here is the veracity of Hayes's

objective evaluations concerning Byrd's poor attitude and neglect

of her paperwork. There remains a disputed issue of fact as to

17 whether these evaluations are accurate. Thus, even though Hayes

may in fact have intended to discharge Byrd, Quantum has not met

its burden of proving that Hayes's defamatory statements were

true.

Next, Quantum argues that there was no publication of the

memo. The R estatement states, "Publication of defamatory matter is

its communication intentionally or by a negligent act to one

other than the person defamed." Restatement, supra, at § 577.

Quantum claims that communication of the memo to all the North

East Area Marketing Representatives was neither intentional nor

negligent. According to Quantum, Hayes intended the memo to be

mailed only to his immediate supervisor, but his assistant

mistakenly addressed and mailed the memo to all the marketing

representatives. Quantum thereby concedes that communication to

the marketing representatives was caused by an administrative

mistake of its employees. Thus there is no failure of proof of

the acts said to constitute negligence, as would be the case, for

instance, if no one was sure how the memo got mailed to all the

marketing representatives. Rather, Quantum argues that mistaken

dissemination of the memo was not negligent because it was

"inadvertent and accidental." The court finds this an unusual

argument, since it is hornbook tort law that inadvertent and

accidental conduct may constitute negligence. The guestion is

18 whether the accident, mistake, inadvertence (or whatever else we

may call it) was unreasonable and negligent.

Defendant's remaining argument on this issue consists of the

assertion that this case is "on all fours with Morrow v. Morrow,

Inc.,

(Or. Ap p . 1996)," in which the Oregon

Supreme Court held that, as a matter of law, it was not negligent

for an employee to save a defamatory computer-generated memo to a

public disk drive accessible to all the coworkers. With all due

respect to the Morrow court, this court cannot concur in the

conclusion that, as a matter of law, saving a defamatory memo to

a public disk drive was a reasonable mistake. But, even

accepting that conclusion as accurate, the case at hand is

distinguishable from Morrow. In Morrow, the defendant's mistake

related to the operation of his computer, and computers are

complex technology, whose proper operation often eludes even the

most technically skilled. In this case, however, Hayes or his

assistant cannot rely on the complexities of technology to excuse

their conduct. Addressing a memo to the intended recipient and

to no one else is a relatively simple task, especially in light

of the sensitive nature of the memo's subject matter. Mistaken

execution of this simple task is farther outside the bounds of

the reasonable than the computer mistake made by the defendant in

Morrow. On these grounds, the case at hand is distinguishable

19 from Morrow.

There remains a disputed issue of fact as to whether

mistaken communication of the defamatory memo to the marketing

representatives was unreasonable and negligent.

Wrongful Termination

Lastly, plaintiff claims she was terminated because "she did

not conform her mode of dress to a more sexually suggestive style

and because she did not have a sexual relationship with Hayes.

Complaint at 14. Since plaintiff has offered no evidence to

substantiate these allegations, this claim cannot survive summary

judgment.

Conclusion

For the reasons outlined above. Quantum's motion for summary

judgment (document 13) is granted as to Counts I, IV, V, and VI.

Summary judgment is denied as to Counts II and III.

Byrd's motion to extend discovery (document 21) is granted

for a two-week period to commence on the date of this order.

Discovery is limited to ascertaining the identity of Hayes's

administrative assistant who allegedly mailed the defamatory memo

to Byrd's coworkers.

Byrd's motion to extend time to file a reply memorandum

20 (document 22) is denied, the court notes that the option of a

motion to reconsider is available to Byrd, and she may advance

any arguments therein that she would have advanced in a reply

memo.

SO ORDERED.

Shane Devine, Senior Judge United States District Court

July 16, 1997

cc: Marian Sagona Lynch, Esg. Edward A. Haffer, Esg. Mark J. Sifferien, Esg.

21