In Richardson v. Wal-Mart Stores, Inc., No. 15-1142, 2016 U.S. App. LEXIS 15565 (6th Cir. Sept. 9, 2016) the Sixth Circuit Court of Appeals recently upheld the district court’s grant of summary judgment in favor of Wal-Mart in an age-discrimination suit based at least in part on the much litigated and maligned — but still available — honest-belief rule because it determined that the store manager honestly believed that the former employee’s disciplinary record justified her firing.

Reva Richardson had worked at a Wal-Mart store in Lansing, Michigan in various capacities, including as a department manager and customer service manager, for approximately 12 years prior to being fired at age 62. Wal-Mart employs a progressive discipline system whereby the company provides levels of “coaching” if an employee’s job performance does not meet company expectations. The first three levels are “written coachings,” and levels two and three require the employee to develop an action plan to correct the problems and concerns. The fourth level requires that the employee be terminated and all four levels require two managers, the one issuing the coaching and another as a witness, to meet with the employee.

Richardson received a first level coaching in January 2011 regarding her attempts to influence the exchange of her daughter’s damaged laptop for a working one, a second level coaching in September 2011 for mishandling a regulated hazardous-material item that had been returned, about which she submitted an action plan and a third level coaching in August 2012 for absenteeism.

She claimed that in November and December 2012 she began to perceive that she was being mistreated by management, including allegations that she had been humiliated, screamed at and embarrassed in front of fellow employees. She also claimed that one former manager had told her son, also a Wal-Mart employee, that she was told old to work there and that she had been asked several times when she was going to quit.

In March 2013 she broke her wrist when she fell while stacking merchandise on a pallet and when three separate members of management reviewed a surveillance tape they determined that she had created a workplace safety hazard by failing to follow proper workplace-safety standards. Because this was her fourth “coaching,” she was terminated. She filed a lawsuit in Michigan state court alleging age discrimination, race discrimination and intentional infliction of emotional distress. The case was removed to federal court where Richardson eventually dismissed the race discrimination and emotional distress claims and the district court granted Wal-Mart’s motion for summary judgment on the age discrimination claim, which Richardson appealed.

Because the appellate court found that Richardson had not presented any direct of evidence of discrimination, it applied the circumstantial evidence burden-shifting McDonnell Douglas test wherein the plaintiff must first prove that she has a prima facie case of age discrimination, which then shifts the burden to the employer to offer a legitimate, nondiscriminatory reason for the firing, which then shifts the burden back to the employee to show that that reason was pretextual. It was undisputed that Richardson had established a prima facie case for age discrimination but Wal-Mart argued that Richardson’s violation of Wal-Mart’s workplace safety practices, which brought her to the fourth and final step of its progressive disciplinary process, was a legitimate, nondiscriminatory reason for the termination.

Richardson rebutted Wal-Mart’s argument by essentially attempting to delegitimize the coachings by claiming, among other things that the coachings were unverifiable, that the documentation was not authentic and that even if it was, they should be excluded from evidence under Michigan law because copies of them were not in her personnel file. The court disposed of each of her arguments because it determined that they were not supported by the record. However, the court also noted that even if she could successfully challenge one or more of the coachings, Wal-Mart was still entitled to summary judgment under the honest-belief rule, which allows an employer to avoid a pretext claim if it can “establish its reasonable reliance on the particularized facts that were before it at the time the decision was made.” In order to overcome an honest-belief justification, the employee “must put forth evidence which demonstrates that the employer did not ‘honestly believe’ in the proffered non-discriminatory reason for its adverse employment action.”

The court determined that Richardson had not done so because she had not shown that the manager who ultimately terminated her did not honestly believe that her coaching history justified her termination. In reaching this conclusion, the court noted “[t]he honest-belief rule provides that an employer is entitled to summary judgment on pretext even if its conclusion is later shown to be mistaken, foolish, trivial, or baseless.” (emphasis added).

Because it determined that Richardson had not offered any direct or circumstantial evidence that would support her claim, Wal-Mart was entitled to summary judgment and it affirmed the district court.

The continued availability of this defense makes it all the more important for employers to not only closely follow their progressive discipline protocol but also carefully document so that can be argued that the company reasonably relied on the process when it took an adverse job decision.


In an opinion that the Tenth Circuit has designated for publication, Paros Properties LLC v. Colorado Casualty Insurance Company, No. 15-1369, 2016 U.S. App. LEXIS 15925 (10th Cir. Aug. 29, 2016), the court held that a mudslide exclusion in a policy insuring a commercial building applied to extensive damages caused to that building by such a slide and relieved the carrier of any obligation under the policy, despite plaintiff’s claim that the mudslide caused the building to “explode,” which could have triggered the “explosion” exception to the mudslide exclusion in the policy. In holding for the insurance company, the court ruled that under such an exception, the word “explosion” refers to damage caused by a buildup of internal pressure, not when a building “explodes” from the mudslide’s impact. It stated that to hold otherwise would virtually eliminate the exclusion and read it out of the policy since mudslides “typically produce extreme forces that can smash anything in their paths.”

In September 2013, the insured’s building was destroyed by a mudslide in Boulder, Colorado, and the owner filed a claim with Colorado Casualty, the issuer of the property policy. The policy contained a provision entitled “Water Exclusion Endorsement” which, among other things, excluded from coverage any damages caused by “[m]udslide or mudflow.” Based on the undisputed fact that the building had been destroyed by a mudslide, Colorado Casualty denied the claim based on the exclusion. Paros Properties, LLC (“Paros”), the building’s owner, filed suit in Colorado state court seeking both payment of the claim and bad faith damages based on the alleged improper claim denial. Colorado Casualty removed the case to federal court based on diversity jurisdiction, albeit untimely based on its argument that it did not have notice that the claim was for more than $75,000 when the complaint was served, and filed a motion for summary judgment based on the mudslide exclusion, which was granted. Paros appealed, citing the exception to the exclusion if the mudslide causes, among other things, an “explosion.”

Paros argued that because the mudslide caused the building to “burst apart with a loud boom,” the damages fell within the explosion exception. The court disagreed and stated that even though the policy did not define “explosion,” the widely accepted definition is that an explosion is the result of a buildup of internal pressure and a sudden bursting outward in all directions. The court did acknowledge however, that under the terms of the policy, if the mudslide had, for example, damaged a gas pipe, which then caused an explosion, the exception would apply, although it rejected Paros’s argument that mud, water, and debris had built up within the building and caused the walls to burst outward because there was no evidence in the record to support that claim. (The court’s scientific analysis of why a watermelon bursting after being shot through by a bullet based on kinetic energy is indeed an explosion makes the opinion a worthwhile read).

Based upon its determination that the building was destroyed by the mudslide and not by an explosion, the court affirmed the district court’s grant of summary judgment to Colorado Casualty.

It is also worth noting that the appeals court determined that Colorado Casualty’s removal was not timely under 28 U.S.C. § 1446 but it determined, based on the United States Supreme Court’s ruling in Caterpillar Inc. v. Lewis, 519 U.S. 61 (1996), that because federal jurisdictional requirements were met at the time of the ruling on the motion for summary judgment, and because the district court had correctly ruled on the merits, the appeals court could affirm the judgment and did not have to remand the case back to the state court and force the parties to relitigate the matter there, expending further costs and burdening the state system.


The Eighth Circuit U.S. Court of Appeals recently reversed the Southern District of Iowa’s ruling in favor of an insurer when it held, in Decker Plastics, Inc. v. West Bend Mutual Ins. Co., No. 15-2861, 2016 U.S. App. LEXIS 15235 (Aug. 19, 2016) that the contamination of landscaping materials with plastic from defective storage bags was an “occurrence” as defined in a commercial general liability policy (“CGL”) and therefore covered under the policy because it was not simply “damages only to work product.”

Al’s Inc. packaged and sold landscaping materials and Decker Plastics Corp. sold plastic bags to Al’s that Al’s filled with landscaping materials and stored outdoors for sale to its customers. Decker failed to manufacture the bags with an ultraviolet inhibitor which allowed the bags to deteriorate in the sunlight, causing small shreds of plastic to mix in with Al’s landscaping materials, sometimes while the bags were still in Al’s possession and sometimes after they had been sold to customers. Because the plastic shreds could not be separated from Al’s products inexpensively, the company had to clean spilled materials from customer sites, purchase replacement bags from another supplier and pay to clean up its own premises.

Al’s sued Decker to recover its losses and after the parties settled the lawsuit, Decker filed a claim with West Bend under its CGL policy, West Bend denied coverage and Decker filed suit in Iowa state court, which was removed to the federal district court. That court eventually granted West Bend’s motion for summary judgment based on its determination that there was no “occurrence,” as defined in the policy. Decker appealed that ruling.

The appeals court first noted that the policy defined occurrence as “an accident, including continuous or repeated exposure to substantially the same general harmful conditions” and that in a narrowly construed holding, the Iowa Supreme Court had held that “defective workmanship standing alone, that is, resulting in damages only to the work product itself, is not an occurrence under a CGL policy.” When the court applied those facts before it to that law however, it determined that the damages caused by Decker’s faulty workmanship were not damages only to the work product itself, i.e., the bags.  Instead, it stated: “Here, Decker’s defective bags were sold to its customer, Al’s, which then used the bags to store its own property, landscaping materials. The defective bags unexpectedly deteriorated, causing damage to Al’s other property.” In other words, the damages caused by the deterioration of the bags, and not simply the deteriorated work product, was the covered occurrence. As such, the court reversed the district court’s ruling and remanded the case for further proceedings.