US DOL v . Karamourtopoulos, et a l . 04-CV-082-SM 03/31/06 UNITED STATES DISTRICT COURT

DISTRICT OF NEW HAMPSHIRE

Elaine Chao, Secretary, United States Department of Labor,

v. Civil N o . 04-cv-82-SM Opinion N o .

Audrey Karamourtopoulos, DVM, and Fremont Animal Hospital, LLC,

O R D E R

The Secretary of Labor brought suit against Audrey

Karamourtopoulos, DVM, and her veterinary hospital, the Freemont

Animal Hospital, LLC, seeking damages and other relief on behalf

of itself and an allegedly aggrieved employee of the hospital.

The Secretary, at the behest of the Occupational Health and

Safety Administration (“OSHA”), alleged that D r . Karamourtopoulos

fired a long-time employee, Cheryl Lewis, in retaliation for

Lewis’s threat to register a complaint with OSHA if D r .

Karamourtopoulos refused to cooperate in having a leased office

trailer tested for mold contamination. Lewis worked in the

trailer for several months and attributed a number of health

problems she experienced to possible mold toxicity.

The parties were unable to settle the matter and a jury

trial was held. The jury returned verdicts in favor of the defendants, D r . Karamourtopoulos and Freemont Animal Hospital.

Defendants now seek attorneys’ fees from the government under the

Equal Access to Justice Act,

(d)(1)(A) (“EAJA”),

arguing that the government’s position before and during the

litigation was not substantially justified by the facts or the

applicable law. The Secretary objects. For the reasons set

forth below, defendants’ motion for attorneys’ fees is

necessarily denied.

Background

Cheryl Lewis was a long-time employee of Freemont Animal

Hospital. She served as the hospital’s business manager and D r .

Karamourtopoulos’s “right hand.” She and D r . Karamourtopoulos

considered themselves to be friends as well. Evidence at trial

tended to establish that D r . Karamourtopoulos could be difficult

on occasion, but that Lewis was generally up to the challenge.

Due to renovations at the hospital, Lewis was temporarily

housed in a leased office trailer for a few months, roughly from

the end of 2002 through the first few months of 2003. During

that time, Lewis developed - or thought she developed - a number

of ailments. Gradually she came to suspect the trailer

environment as the cause of her illness(es), and complained. Dr.

2 Karamourtopoulos offered to move Lewis out of the trailer when

she first complained, but Lewis stayed on longer. A few weeks

later, Lewis moved from the trailer into D r . Karamourtopoulos’s

home (adjacent to the hospital) and then into temporary space in

the hospital itself.

Nevertheless, Lewis wanted the leased trailer tested for

mold contamination to confirm or disprove her suspicion that mold

toxicity was the root cause of her health problem. She arranged

for testing at her own expense. But D r . Karamourtopoulos gave

Lewis the impression that she was not going to be cooperative,

seemingly delaying giving permission to test, while not expressly

refusing. She asked Lewis for information about the testing, and

insisted that she be present when the testing occurred, while at

the same time not agreeing to any definite time for the testing.

The evidence suggested that D r . Karamourtopoulos was unfamiliar

with employer immunity from suit under New Hampshire’s Workers’

Compensation Law, N.H. Rev. Stat. Ann. ch. 281-A, and probably

feared potential tort liability if the trailer was found to be

contaminated.

In any event, Lewis took matters into her own hands and

unilaterally obtained some samples from the trailer on a

3 Saturday, when she was not working. D r . Karamourtopoulos was

offended by what she perceived to be Lewis’s going behind her

back. Other miscues and miscommunications exacerbated the

situation and, on May 2 0 , 2003, the two had a heated argument.

Lewis thought Karamourtopoulos was insensitive to her health

concerns and was refusing to allow the trailer to be tested.

Karamourtopoulos thought Lewis was being disloyal, insubordinate,

and perhaps building a case for personal liability. The argument

culminated, said Lewis, in her threatening to file a complaint

with OSHA if Karamourtopoulos refused to permit testing of the

trailer, followed quickly by Karamourtopoulos telling Lewis that

she had to “leave right now,” and that she could not go into the

hospital, but had to “have someone get your things.” Lewis

understood that she had just been fired.

After Lewis retrieved her belongings, but before she could

leave, Karamourtopoulos approached her. A lengthy conversation

ensued in the hospital’s parking lot. Nothing was resolved, and

Karamourtopoulos says Lewis quit, despite her having asked Lewis

not to do s o . Lewis maintains that Karamourtopoulos never asked

her to come back to work and that she was fired (and remained

fired) because she threatened to complain to OSHA.

4 Lewis filed a complaint with OSHA. An OSHA field

investigator, after looking into the matter and interviewing

potential witnesses, recommended that the complaint be dropped

because, she determined, there was insufficient evidence to

support the conclusion that Lewis was fired as opposed to

voluntarily quit. That recommendation was reviewed in the normal

course by an OSHA senior investigations manager, who thought the

initial investigation inadequate. He asked for additional

information. After obtaining and considering the additional

information, the senior investigator thought Lewis’s complaint

might have merit. Accordingly, he and Department of Labor

Attorney David Baskin (who later represented the Secretary in the

civil case) re-interviewed Lewis. They found her to be credible

and, after assessing all of the circumstances, decided to press a

claim for retaliatory discharge under Section 11(c) of the

Occupational Health and Safety Act,

(c). Dr.

Karamourtopoulos was not re-interviewed because, in the senior

investigator’s view, the file “already contained a detailed

letter from her, in which she carefully set forth her position.”

Both OSHA’s senior investigator and legal counsel understood

that the retaliatory discharge case turned on whether a jury

would credit Lewis’s testimony, and find that Karamourtopoulos’s

5 orders to Lewis - i.e. “leave right now” and do not go into the

hospital but “have someone get your things” - constituted a

discharge, as well as whether, given the close temporal proximity

between Lewis’s threat to call OSHA and Karamourtopoulos’s

statements, a jury would find the discharge to have been in

retaliation for Lewis’s invocation of her right to complain about

work place safety to OSHA. Because, in their opinion, a jury

would likely credit Lewis, and because other evidence tended to

support Lewis’s complaint, they decided that a provable case of

retaliatory discharge existed.

The parties differ markedly about the process from that

point onward - each blaming the other for the necessity of filing

suit and the lack of meaningful progress toward pretrial

settlement. The government says defendants, through counsel,

refused to discuss the matter in response to its formal notice of

intent to sue, instead expressing a preference for exercising

full discovery rights after suit was filed. Defendants say the

government filed suit precipitously and without a solid basis.

They also claim they were afforded no real opportunity to discuss

settlement, given the government’s firm but unreasonable demands

for $200,000 in compensation for Lewis and a posted admission of

Labor Law violations in the workplace. Each side also points to

6 the other as being unreasonably inflexible in pretrial

negotiations (such as they were). The government says it was

willing to mediate the dispute before the Magistrate Judge, but

defendants declined. It also says defendants refused to make a

reasonable offer and plainly expected the government to “bid

against itself.” Defendants say they made no serious settlement

proposals because the government’s position was so unrealistic,

and because they were convinced they had done no wrong.

Analysis

Defendants are prevailing parties and therefore are entitled

to recover their attorneys’ fees from the government under the

EAJA, unless the government can establish by a preponderance of

the evidence that its position was substantially justified.

McDonald v . Sec’y of Health & Human Servs.,

(1st Cir. 1989). That i s , the government must establish that its

position, both administratively and in litigation, had a

reasonable basis in fact and law, and was “justified to a degree

that could satisfy a reasonable person.”

at 1475 (quoting

Pierce v . Underwood,

5 2 , 565 (1988)). Both the

government’s underlying position (administratively), and its

litigation position are to be evaluated, as a whole, in

determining whether its actions as to these defendants were

7 substantially justified. McDonald,

. And, of

course, the government’s settlement position ought to be

considered as well. Dantran, Inc. v . U.S. Dept. of Labor,

6 , 44 (1st Cir. 2001).

For EAJA purposes, “substantially justified” does not mean

“justified to a high degree, but rather justified in substance or

in the main . . . .” Pierce, 487 U.S. at 565; see also Dantran,

246 F.3d at 51-52 (Selya J., dissenting). In addition, the fact

that the government loses a case at trial, as it did here, does

not create a presumption that its litigation position was not

substantially justified. Id. at 40 (citing Pierce, 487 U.S. at

569).

Here, defendants advance three major points. They say the

Secretary should not have gone forward with this enforcement

action because the initial field investigator recommended against

proceeding; that the Secretary’s pretrial settlement position

(demanding $200,000 in damages and posted notices in the

workplace conceding the alleged labor law violation) was

unreasonable; and, finally, that the Secretary’s litigation

position was unreasonable in that the government failed to offer

evidence at trial supporting its theory that D r . Karamourtopoulos

8 “had impeded or interfered with M s . Lewis’s efforts to test the

trailer [for mold].” (Actually the government’s theory was that

Dr. Karamourtopoulos fired Lewis in retaliation for invoking her

right to complain to OSHA. It offered evidence of

Karamourtopoulos’s resistence to testing as support for its claim

that Karamourtopoulos was concerned (albeit incorrectly) about

her personal liability exposure and so had a motive to fire Lewis

for threatening to call OSHA.)

The court is not unsympathetic to defendants’ plight. Dr.

Karamourtopoulos believed she had done nothing wrong; the

government gave her some reason to think, early o n , that an

enforcement action would likely not be pursued; she refused to

give in to Attorney Baskin’s seemingly overreaching demand for a

very large sum of money in what most lawyers would think a low-

dollar-value case (particularly after discounting for the obvious

trial risks); and she prevailed against the government at a jury

trial.

All of which is to say that D r . Karamourtopoulos is entitled

to some sympathy, and respect, for standing up to what no doubt

appeared to her to be an overbearing bureaucracy exercising poor

judgment, making severe demands seemingly designed to preclude

9 rather than encourage a reasonable resolution of the dispute, and

seemingly bent upon turning a transitory, albeit bitter, argument

between friends who had an employer-employee relationship into a

major (and expensive) OSHA retaliatory discharge case.

But, as noted in Wilfong v . United States,

(7th Cir. 1993), that the object of an enforcement action

properly stands up against the government and prevails in

litigation brought by i t , at significant personal expense, does

not bear on whether the government’s enforcement action was

“substantially justified” within the meaning of EAJA. Congress

did not see fit to waive sovereign immunity with respect to fee

awards for all parties who prevail against the government in

litigation, but only in those cases where the government’s action

was not substantially justified.

In the end, although the court would have preferred to see a

less hardened litigation approach, a less aggressive settlement

posture, a more reasoned and conciliatory effort by government

counsel to resolve the dispute on better terms for M s . Lewis (and

less expensive ones for D r . Karamourtopoulos), and a more sober

assessment of the realities of the case, still, it cannot be said

10 that the government’s position was not substantially justified

within the meaning of EAJA.

Under Section 11(c) of the Occupational Health and Safety

Act, the Secretary of Labor is duty-bound to protect employees

from being discharged in retaliation for exercising their rights

to workplace safety as enacted by Congress. Here, the government

was faced with a situation in which an aggrieved long-time

employee complained that she was fired immediately after she

threatened her employer with an OSHA complaint if the employer

did not consent to environmental testing of the workplace for

toxic substances (at the employee’s own expense). A senior OSHA

investigator and OSHA legal counsel determined, after personally

interviewing the employee and reviewing the investigative file,

that the complainant was credible, that developed evidence was

consistent with, even corroborative of the alleged victim’s

story, and somewhat inconsistent with the employer’s claim that

the employee voluntarily quit. The employee, they determined,

was fired, and was fired because she invoked her rights under the

Act. They also determined that they had a triable case, since it

would turn on credibility, and they thought in good faith that

they had both a credible complainant and supporting evidence.

11 The jury, after a full exposition of the facts, disagreed.

It credited defendants’ version of the critical events (or

accepted defense counsel’s persuasive argument, that even if the

employee was fired and did not quit, still, her discharge was not

due to her passing comment about a possible complaint to OSHA).

To avoid the imposition of fees in this case, the government

invokes authority holding that when a trial verdict necessarily

turns on a jury’s assessment of witness credibility, as it

assuredly did here, it cannot be said that the government’s

position was not substantially justified. See Wilfong,

. That seems a common sense principle, perhaps not true in

all cases - one can readily imagine OSHA unjustifiably relying

upon an inherently incredible witness in bringing an enforcement

action - but true in this case.

Nothing in the record suggests that facts or circumstances

existed that fairly put the government on notice that proceeding

on the strength of Lewis’s version of events was either

unsupportable or unrealistic. She was not an inherently

unreliable witness. The jury could have supportably found, on

the evidence presented, that Lewis was fired, and was fired

because she insisted on mold testing, and threatened to go to

OSHA if her employer did not permit i t . It did not so find, but

12 all that can be said about the verdict with confidence is that

the jury necessarily determined either that D r . Karamourtopoulos

was right, or that Lewis was fired but not because she threatened

to complain to OSHA, or simply that the government failed to meet

its burden of proof.

The government was also not unjustified in proceeding

administratively over the initial recommendation of its field

investigator - higher levels of review are an inherent fact of

the administrative process, and superiors are generally not bound

to act consistently with a subordinate’s recommendation. The

initial investigator may have thought (correctly it turns out)

that the case would be difficult to prove, given that it came

down to opposing stories and not much corroborating evidence

favoring one or the other. Nevertheless, OSHA’s senior

investigator and legal counsel were entitled to review the matter

and decide for themselves whether they had a triable case,

including whether Lewis was, and would be perceived by a jury to

b e , credible. They were not required to re-interview the

employer or anyone else before deciding to pursue the matter on

behalf of the allegedly aggrieved employee; they had the entire

case file to review, and they satisfied themselves with regard to

the one issue they thought critical. The issue for them was, “Do

13 we have a presentable, supported case?” Their determination that

they did was fairly grounded in the facts as they plausibly

understood them to b e .

Finally, the government’s settlement position was not

unreasonable given the circumstances - somewhat ambitious

perhaps, but not so far outside the boundaries of reasoned

analysis as to be abusive or oppressive, in the sense that the

government unjustifiably forced defendants, as a practical

matter, to go through a punitive trial at great expense. First,

the government’s estimation of Lewis’s lost wages claim was

facially reasonable. If the jury accepted her testimony and

credited her position that she would have been afforded some

flexibility by defendants with respect to her work hours, given

her deteriorating post-termination medical condition (which was

not related to mold toxicity but rheumatoid arthritis),

approximately $60,000 in actual losses was probably high but in

the ballpark. The punitive damages demand of roughly $140,000

was also high (and not one conducive to actually resolving the

case) but, again, not irrational or unwarranted given that a jury

could have credited Lewis’s testimony and might have found a

deliberate, intentional, and punitive discharge that was not only

unlawful but personally traumatizing to Lewis as well. The

14 government’s assessment of its likelihood of success was not, in

the court’s opinion, very astute, but neither was it irrational.

Moreover, as government counsel points out, defendants were

equally firm in stressing that they would not concede any

violation of the law, would not pay a substantial sum to settle

the matter (defendants only offered to reimburse Lewis for the

$1,200 in mold testing costs she incurred), and did not offer to

reinstate Lewis. As a consequence, defendants put the government

in the position of “bidding against itself” with respect to

negotiating a settlement. It was the court that encouraged a new

settlement demand from the government at the final pretrial

conference - the defendants did not invite one with a new and

more realistic offer. The government was also willing to mediate

the dispute before the Magistrate Judge, but defendants declined.

While the court would certainly have preferred the government to

have gone the extra step and present a demand likely to settle

the matter on reasonable terms for both sides, the government was

not obliged to do so to avoid the imposition of fees under EAJA.

And, of course, defendants likewise did not put forward an offer

likely to have actually resolved the dispute.

15 The parties were of decidedly different views on the likely

outcome, and each had a basis for thinking it would prevail. The

government lost to a well-presented defense and well-argued

summation. But it cannot be said that the government acted

without substantial justification, either administratively or in

litigating this enforcement action.

The motion for attorneys’ fees (document no. 64) is,

therefore, necessarily denied.

SO ORDERED.

Steven J. McAuliffe 'Chief Judge

March 31, 2006

cc: David L. Baskin, Esq. Debra W. Ford, Esq. Donald L. Smith

16