Lana Starkey v. Amber Enterprises, Inc. ( 2021 )

United States Court of Appeals
For the Eighth Circuit
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No. 19-3688
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Lana L. Starkey
lllllllllllllllllllllPlaintiff - Appellee
v.
Amber Enterprises, Inc., a Corporation, doing business as Amber Pharmacy
lllllllllllllllllllllDefendant - Appellant
Hy-Vee, Inc., a Corporation; Mike Agostino, Individually
lllllllllllllllllllllDefendants
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No. 19-3757
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Lana L. Starkey
lllllllllllllllllllllPlaintiff - Appellant
v.
Amber Enterprises, Inc., a Corporation, doing business as Amber Pharmacy;
Hy-Vee, Inc., a Corporation; Mike Agostino, Individually
lllllllllllllllllllllDefendants - Appellees
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Appeals from United States District Court
for the District of Nebraska - Omaha
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Submitted: December 4, 2020
Filed: February 4, 2021
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Before BENTON, ERICKSON, and GRASZ, Circuit Judges.
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ERICKSON, Circuit Judge.
Lana L. Starkey claims her resignation from Amber Enterprises, Inc., doing
business as Amber Pharmacy, (“Amber Pharmacy”) was because of discrimination,
retaliation, demotion and a hostile work environment. She brought this employment
action asserting various federal and state claims against Amber Pharmacy, Hy-Vee,
Inc., and Mike Agostino, the President of Amber Pharmacy, (collectively,
“defendants”) in the District Court of Douglas County, Nebraska (“state court”). The
defendants removed the case to federal court and moved for summary judgment. The
district court granted summary judgment in favor of the defendants on all but a
portion of Starkey’s Nebraska Fair Employment Practice Act (“NFEPA”) claim,
which it remanded to state court. We affirm the grant of summary judgment, but
vacate the part of the order related to the NFEPA claim, with directions that the
NFEPA claim be remanded to the state court in its entirety.
I. BACKGROUND
Starkey was employed with Amber Pharmacy, a company in the specialty
pharmaceutical industry, from September 2001 until August 2015. Starkey’s position
changed in May 2014 from Director of Enrollment to Director of Financial Services.
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The change in position coincided with the acquisition of Amber Pharmacy by Hy-
Vee, Inc., a supermarket chain.
Following the acquisition, Amber Pharmacy’s accounting and financial
department was found to be “in complete disarray,” a situation exacerbated when
Amber Pharmacy implemented a new operating system in February 2015. Amber
Pharmacy had retained a third-party “implementation consultant” for the new
operating system, and, on March 30, 2015, the consultant reported that the biggest
obstacle to implementation of the new system was that the financial team was “under
staffed,” “potentially not the right skill level,” and lacked “management in the
financial area.” The consultant recommended restructuring the financial team. At
about the same time as the consultant’s report, Starkey reported to others at Amber
Pharmacy that Amber Pharmacy was being overpaid by Texas Medicaid; that
incorrect billing codes were being used for Texas Medicaid; and that some employees
were engaged in email practices that raised concerns about violating the Health
Insurance Portability and Accountability Act of 1996 (“HIPAA”), 42 U.S.C.
§ 1320d–6.
Amber Pharmacy considered various plans for restructuring the financial
department, ultimately deciding to eliminate Starkey’s position. According to Amber
Pharmacy, Agostino made this decision because the company needed to focus on
accounting expertise, which Starkey lacked, and because Starkey had struggled to
adapt to the new operating system. At meetings held on May 29, 2015, and
June 2, 2015, Starkey was informed that her position was being eliminated. Amber
Pharmacy offered Starkey a choice of two new positions, each of which were
demotions with a substantial reduction in pay. On June 4, 2015, Starkey reluctantly
accepted one of the positions but questioned whether her demotion was due to her
report of Medicaid and HIPAA issues. Effective August 13, 2015, Starkey, who was
then 51 years old, resigned. Starkey did not receive timely notice of her right to elect
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temporary continuation of health insurance coverage under the Consolidated
Omnibus Budget Reconciliation Act of 1985 (“COBRA”), 29 U.S.C. § 1161 et seq.
The district court granted summary judgment on each of Starkey’s federal
claims, exercised supplemental jurisdiction over the state claims, and granted
summary judgment on all state claims, except for a portion of the NFEPA claim. On
the NFEPA claim, the court reached a split decision, denying summary judgment on
the portion of the claim that Starkey had been retaliated against for reporting
Medicaid discrepancies but granting summary judgment on the parts of the claim
based on Starkey reporting HIPAA issues and filing charges with the Nebraska Equal
Opportunity Commission (“NEOC”). Having reached these conclusions, the court,
citing 28 U.S.C. § 1367(c)(3), declined to exercise further supplemental jurisdiction
over the NFEPA claim and remanded what remained to the state court.1
Amber Pharmacy appeals the district court’s partial denial of summary
judgment on the NFEPA claim. Starkey appeals the district court’s decision on all
the claims except for her claim brought under Title VII of the Civil Rights Act of
1964, 42 U.S.C. § 2000e et seq., which she abandoned on appeal.
II. DISCUSSION
We review the district court’s grant of summary judgment de novo, “viewing
the evidence and drawing all reasonable inferences in the light most favorable to
[Starkey], the nonmoving party.” Main v. Ozark Health, Inc., 959 F.3d 319, 323 (8th
Cir. 2020) (quoting Kirkeberg v. Canadian Pac. Ry., 619 F.3d 898, 903 (8th
Cir. 2010)). We affirm where no genuine issue of material fact exists and the
1
As to Starkey’s NFEPA claim, the court also found Hy-Vee and Agostino were
not proper parties and granted summary judgment in their favor on this claim.
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defendants are entitled to judgment as a matter of law. Eggers v. Wells Fargo Bank,
N.A., 899 F.3d 629, 632 (8th Cir. 2018) (citations omitted).
A. Federal Claims
We first consider the district court’s grant of summary judgment on Starkey’s
claim of age discrimination in violation of the Age Discrimination in Employment
Act of 1967 (“ADEA”), 29 U.S.C. § 621 et seq. “To establish age discrimination, a
plaintiff must prove by the preponderance of the evidence that age was the but-for
cause of the employment decision.” Hilde v. City of Eveleth, 777 F.3d 998, 1003 (8th
Cir. 2015). Because Starkey does not allege direct evidence of age discrimination,
her claim is analyzed under the familiar burden-shifting test in McDonnell Douglas
Corp. v. Green, 411 U.S. 792 (1973).
To establish a prima facie case, a plaintiff must show she “(1) was at least forty
years old, (2) suffered an adverse employment action, (3) was meeting [her]
employer’s legitimate expectations at the time of the adverse employment action, and
(4) was replaced by someone substantially younger.” Gibson v. Am. Greetings Corp.,
670 F.3d 844, 856 (8th Cir. 2012) (quoting Morgan v. A.G. Edwards & Sons, Inc.,
486 F.3d 1034, 1039 (8th Cir. 2007)). If the plaintiff establishes a prima facie case,
the burden shifts to the employer to articulate a legitimate, nondiscriminatory reason
for the adverse employment action. Id. If the employer proffers such a reason, the
burden shifts back to the plaintiff to show that the proffered “reason was mere pretext
for discrimination” and that “age was the ‘but-for’ cause of the challenged adverse
employment action.” Id. (quoting Haigh v. Gelita USA, Inc., 632 F.3d 464, 468 (8th
Cir. 2011)).
Assuming Starkey established a prima facie case, the defendants articulated a
legitimate, nondiscriminatory reason for eliminating Starkey’s position and demoting
her: the need to restructure the financial department to put a stronger emphasis on
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accounting and more effectively implement the new operating system. See Aulick v.
Skybridge Ams., Inc., 860 F.3d 613, 621 (8th Cir. 2017) (finding an employer’s goal
to focus on other areas of expertise to improve its business was a legitimate,
nondiscriminatory justification for eliminating an employee’s position). Amber
Pharmacy asserted it needed to prioritize accounting in order to address issues arising
out of the new operating system. Starkey admitted that “[a]ccounting is not for
[her].” We will not second guess this business judgment, particularly when it was
based, in part, on a third-party consultant’s recommendations. This shifts the burden
to Starkey to establish the reasons given by Amber Pharmacy are pretextual and that
age was the real reason for her termination.
Starkey’s evidence of pretext consisted of identification of Amber Pharmacy
employees over the age of forty who were terminated as well as younger employees
who absorbed Starkey’s job duties following her demotion. In evaluating this
evidence, the district court found Starkey’s examples involving older employees did
not show pretext because (1) the record was insufficient to assess the circumstances
surrounding those employees’ terminations; (2) the few facts actually in the record
did not show that the other employees were similarly situated to Starkey; and
(3) discrimination against the other employees was irrelevant to Starkey’s claim. The
district court also found that Starkey failed to show the younger employees were
similarly situated. Having closely examined the record below, we agree that
Starkey’s evidence was insufficient and did not satisfy her burden of showing age was
a motivating factor in the defendants’ decision to restructure.
Starkey raised an additional issue for the first time in her reply brief on appeal,
claiming the district court misconstrued her claim because her “situation is more akin
to a reduction in force or ‘restructure’ where the employer terminates the older
employee and does not replace her because the position no longer exists.” Thus,
Starkey argues, the termination of other older employees is relevant “statistical
evidence” of pretext. We do not entertain belated arguments raised for the first time
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on appeal in reply briefs. Norwest Bank of N.D., N.A. v. Doth, 159 F.3d 328, 334
(8th Cir. 1998). But even if we considered Starkey’s argument, her examples of other
coworkers are inadequate to support a discrimination claim in the context of a
reduction in force. See Grant v. City of Blytheville, 841 F.3d 767, 775 (8th
Cir. 2016) (finding statistical evidence insufficient when it inadequately analyzed the
treatment and circumstances of other employees); Chambers v. Metro. Prop. & Cas.
Ins. Co., 351 F.3d 848, 856 (8th Cir. 2003) (noting that “statistical evidence is
meaningless” absent an analysis of the workforce “before and after the reduction in
force”). The defendants are entitled to summary judgment on Starkey’s ADEA claim.
Starkey’s remaining federal claim alleged a violation of COBRA and the
Employee Retirement Income Security Act of 1974 (“ERISA”), 29 U.S.C. § 1001 et
seq. Starkey has pointed to no statutory authority requiring her employer to provide
her notice of COBRA benefits within thirty days of termination. She has not cited
any case in which a court has imposed penalties on an employer for failing to meet
its obligations to notify a plan administrator of a qualifying event. And perhaps most
significantly, Starkey has not pointed to any facts showing an interference with her
attainment of benefits or that she was prejudiced in any way by the lack of notice.
Starkey admitted that she knew about her COBRA rights, that she would not have
elected COBRA coverage even if she had received notice, and that she enrolled in her
husband’s less expensive plan in which she had no out-of-pocket medical expenses
that year. The defendants are entitled to summary judgment on Starkey’s COBRA
and ERISA claim.
B. State Claims
A district court exercising original jurisdiction over federal claims also has
supplemental jurisdiction over state claims which “form part of the same case or
controversy” as the federal claims. 28 U.S.C. § 1367(a). In the “usual case” where
all federal claims are dismissed on a motion for summary judgment, “the balance of
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factors to be considered under the [supplemental] jurisdiction doctrine—judicial
economy, convenience, fairness, and comity—will point toward declining to exercise
jurisdiction over the remaining state-law claims.” Carnegie-Mellon Univ. v. Cohill,
484 U.S. 343, 350 n.7 (1988). “We rarely overturn this ‘purely discretionary’ call.”
McManemy v. Tierney, 970 F.3d 1034, 1040–41 (8th Cir. 2020) (quoting Crest
Constr. II, Inc. V. Doe, 660 F.3d 346, 359 (8th Cir. 2011)). Having had an
opportunity to review the parties’ additional briefs on the issue of whether the district
court abused its discretion in exercising supplemental jurisdiction over the state
claims, we find the exercise of supplemental jurisdiction was appropriate as to some
of Starkey’s claims.
Starkey’s age discrimination claim brought under Neb. Rev. Stat. § 48-1001et seq. (“Nebraska ADEA”) is premised on the same grounds as her federal ADEA
claim. The district court acted well within its discretion in exercising jurisdiction
over the Nebraska ADEA claim because the Nebraska ADEA is so closely patterned
after the federal ADEA that Nebraska courts look to federal law when deciding
Nebraska ADEA claims. Oldfield v. Neb. Mach. Co., 894 N.W.2d 278, 292 (Neb.
2017). Given the similarities between the federal and state ADEA claim, it was
appropriate for the district court to exercise supplemental jurisdiction and grant
summary judgment on the Nebraska ADEA claim.
Starkey also alleged the defendants subjected her to unbearable treatment by
demoting and then ostracizing her. It is well established under Nebraska law that, to
have a cognizable intentional infliction of emotional distress claim, Starkey must
allege sufficient facts to show both outrageous conduct and severe emotional distress,
which she failed to do. See Heitzman v. Thompson, 705 N.W.2d 426, 430–31 (Neb.
2005) (listing elements and explaining “petty oppressions” are inadequate). Starkey’s
claim for intentional infliction of emotional distress was neither novel nor complex.
Under the circumstances, the exercise of supplemental jurisdiction would not offend
principles of comity and fairness. See Thomas v. United Steelworkers Local 1938,
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743 F.3d 1134, 1141 (8th Cir. 2014) (finding a district court properly exercised
supplemental jurisdiction over a state claim involving “well-settled principles of state
law”).
Starkey’s final state claim alleged a violation of Neb. Rev. Stat. § 48-1101 et
seq. (“NFEPA”). She asserted the defendants retaliated against her for reporting
Medicaid and HIPAA issues and for engaging in NEOC activity. This claim turns
heavily on whether Starkey’s activity was “protected conduct” under the statute.
McPherson v. City of Scottsbluff, 931 N.W.2d 451, 462 (Neb. 2019) (noting
protected conduct is an element of a NFEPA retaliation claim). It appears resolution
of this claim will require deciding whether the Nebraska courts would adopt a
“manager rule” in the context of a retaliation claim under NFEPA. See Andrew J.
Ruzicho et al., Employment Practices Manual § 6B:4 (Dec. 2020) (cleaned up) (An
emerging trend in the courts is application of a “manager rule,” which provides that
a management employee who, in the course of her normal job performance, disagrees
with or opposes the actions of an employer does not engage in protected activity.).
When a claim raises novel issues of state law, we have determined that it is better to
let the state courts decide the matter. EEOC v. Con-Way Freight, Inc., 622 F.3d
933, 938 (8th Cir. 2010); Birchem v. Knights of Columbus, 116 F.3d 310, 314 (8th
Cir. 1997).
Additionally, once the district court remanded at least part of this case to the
state court for its consideration, judicial economy and convenience no longer weighed
in favor of the federal courts reaching this issue. Because the question of whether the
“manager rule” applies under Nebraska law is one that powerfully implicates notions
of comity, this is one of those rare cases in which the district court should have
declined to exercise jurisdiction in order “to accommodate [Nebraska’s] strong
interest in interpreting its own [statute] and to guarantee a ‘surer-footed reading’ of
the statute.” Marianist Province of the United States v. City of Kirkwood, 944 F.3d
996, 1004–05 (8th Cir. 2019) (quoting United Mine Workers of Am. v. Gibbs, 383
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U.S. 715, 726 (1966)). We vacate the district court’s order on the NFEPA claim with
instructions to remand the claim in its entirety to state court so that Nebraska courts
may resolve the novel questions of state law.
III. CONCLUSION
We affirm the district court’s grant of summary judgment on Starkey’s ADEA,
COBRA/ERISA, Nebraska ADEA, and intentional infliction of emotional distress
claims. We vacate the court’s order pertaining to Starkey’s NFEPA claim with
instructions to remand the claim in its entirety2 to state court.
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2
The NFEPA claim in its entirety includes the allegations against all the
defendants based on Starkey’s report of the Medicaid issues and HIPAA issues, her
participation in NEOC activity, and her constructive discharge claim.
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