Ekeya v. Shriners Hospital for Children, Portland

Citation: 258 F. Supp. 3d 1192Docket: Case No. 3:17-cv-195-SI

Court: District Court, D. Oregon; July 10, 2017; Federal District Court

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Kay Ekeya filed employment-related claims under Oregon law against her former employer, Shriners Hospital for Children, Portland, and its Administrator, John C. Patchin, alleging retaliation for reporting a violation of patient privacy rights. Ekeya contends that her employment was terminated after she disclosed that her supervisor permitted a news reporter to take unauthorized photographs in restricted areas of the hospital. Ekeya, a Washington citizen, initiated the case in Oregon state court, but the Defendants removed it to federal court, claiming diversity jurisdiction. They argue that Patchin, an Oregon citizen, was fraudulently joined to evade the forum defendant rule, which prohibits removal if any defendant is a citizen of the forum state. Ekeya filed a motion to remand, asserting that Patchin was not fraudulently joined, while Defendants moved to dismiss her claims against him. The legal standards for removal and remand are discussed, emphasizing that a civil action can be removed to federal court if there is original jurisdiction, specifically under diversity, which requires complete diversity among parties. The forum defendant rule prohibits removal if any properly joined defendant is a citizen of the state where the action is brought. The text highlights that federal courts have limited jurisdiction and removal statutes are strictly construed against the removing party, who bears the burden of proof for proper removal.

Fraudulent joinder is an exception to the complete diversity requirement in diversity jurisdiction cases, allowing a district court to disregard a nondiverse defendant if that defendant has been fraudulently joined. The burden of proof lies with the removing defendant to demonstrate fraudulent joinder by "clear and convincing evidence," overcoming both the presumption against removal jurisdiction and the presumption against fraudulent joinder. A joinder is considered fraudulent when it is evident that the plaintiff has failed to state a cause of action against the resident defendant under applicable state law. If there is any possibility that a state court could find a valid cause of action against the resident defendants, the federal court must deem the joinder proper and remand the case. Courts typically evaluate only the plaintiff's pleadings to assess removability, but in cases of alleged fraudulent joinder, the court may conduct a broader inquiry. This inquiry is limited to identifying undisputed facts that would prevent the plaintiff from recovering against the in-state defendant. If the court cannot make a decision in this summary manner, it indicates that the removing party has not met its burden of proof.

A motion to dismiss for failure to state a claim can be granted only if there is no valid legal theory or if the complaint lacks sufficient factual allegations to present a plausible claim for relief. The court must accept as true all well-pleaded material facts and interpret them favorably for the non-moving party. Allegations must provide adequate underlying facts to inform the opposing party about the nature of the claim and enable effective defense. General recitations of legal elements without supporting facts do not suffice to warrant a presumption of truth. A complaint must suggest a plausible entitlement to relief, ensuring it is not unjust to require the opposing party to incur the costs of discovery and litigation. Facial plausibility exists when factual content allows for a reasonable inference of the defendant's liability.

In the background provided, Ekeya worked at Shriners Portland for nearly 16 years, receiving positive performance reviews and promotions, including a recent advancement to Public Relations Manager in March 2016. In July 2016, the hospital administrator, Patchin, created a new position for Director of Business Development, appointing Davene Dietzler-Marihart, who previously reported to Ekeya. This reorganization led to Ekeya reporting to Dietzler-Marihart, causing dissatisfaction. On July 22, 2016, a meeting took place among Rhonda Smith (HR Director), Patchin, and Dietzler-Marihart, where they discussed Ekeya's reluctance to collaborate under the new structure. Smith recommended terminating Ekeya’s employment and sought approval for a severance package, despite knowing that severance was typically not provided unless for position elimination, which did not apply in this case.

Smith informed Dean via email about a request to terminate an employee who had served the hospital for nearly 16 years, emphasizing no performance issues but indicating challenges with the new reporting structure and potential morale problems. Smith expressed urgency in acting on the termination due to the significant personnel issue distracting the Business Development office, highlighting the importance of addressing this before key projects commenced. Dean queried whether the termination was a "buy out" rather than a job elimination, to which Smith clarified it was not a position elimination but a significant change in the role. Smith acknowledged the usual policy against severance for non-elimination cases but argued that retaining the employee would hinder a new manager’s ability to manage critical initiatives. 

Smith's communication suggested an ongoing possibility for Ekeya's retention, as she sought a severance exception for Ekeya in exchange for a release of claims. However, the Shriners organization did not approve this severance exception, and Ekeya did not sign any release. By late August 2016, Ekeya remained employed and reported a potential HIPAA violation concerning a breach of non-public areas by Dietzler-Marihart. On August 22, Ekeya disclosed this violation during a Board meeting, which likely displeased Dietzler-Marihart, Smith, and Patchin. 

Subsequently, on August 24, Shriners Portland prepared an Employee Counseling Report recommending Ekeya's discharge, citing insubordination and an unwillingness to collaborate. The report indicated a consensus among hospital representatives regarding Ekeya's behavior. Ekeya's termination was effective August 25, 2016, with both Ekeya and Smith signing the report on that date.

Ekeya’s lawsuit, initially filed in state court, includes two claims against Shriners Portland and Patchin. The first claim alleges retaliation by Shriners Portland for Ekeya's reporting of unlawful conduct, violating Oregon statutes Or. Rev. Stat. 659A.030(1)(f) and 659A.199(1). The second claim accuses Patchin of fostering a retaliatory environment and aiding Shriners Portland's actions, violating Or. Rev. Stat. 659A.030(1)(g). The defendants removed the case to federal court, attempting to bypass the forum defendant rule by claiming Patchin was fraudulently joined, despite being a citizen of the forum state. Ekeya seeks remand to state court and an award of attorney fees if successful.

The court must determine if the fraudulent joinder doctrine can circumvent the forum defendant rule and whether Patchin was indeed fraudulently joined. Federal jurisdiction requires complete diversity or a federal question; without complete diversity, the plaintiff retains control over the choice of forum and may avoid federal court by relying solely on state law. The forum defendant rule exists to prevent local defendants from removing cases to federal court when plaintiffs might otherwise face prejudice. Strategies for plaintiffs to maintain state court jurisdiction include including either a non-diverse or an in-state defendant. However, if a state court would not find a viable claim against the non-diverse or in-state defendant, they may be dismissed, potentially exposing remaining out-of-state defendants to the very prejudice Congress aimed to prevent by allowing removal.

The applicability of the fraudulent joinder doctrine in relation to the forum defendant rule is uncertain at the federal appellate level, with the Seventh Circuit indicating that it has not definitively resolved this issue in cases like Morris v. Nuzzo. The core question is whether the fraudulent joinder doctrine can exempt defendants from the forum defendant rule even when complete diversity exists among the parties. Although some district courts have ruled in favor of applying the doctrine to diverse forum defendants, others have disagreed, leading to a split in authority. The Seventh Circuit expressed reluctance to make a ruling on this matter without a more comprehensive presentation of the relevant interests. In the specific case at hand, the court determined that the defendant, Patchin, was not fraudulently joined, thus negating the need to address the broader question of the doctrine’s applicability. However, the court noted that the text of the forum defendant rule suggests that the fraudulent joinder doctrine should apply, as it states that a civil action removable on diversity grounds cannot be removed if any properly joined and served defendant is a citizen of the state where the action is brought. The court concluded that since the Minnesota Defendants were found to be fraudulently joined, they were not 'properly joined,' allowing for the forum defendant rule’s limitations to be circumvented.

The fraudulent joinder doctrine is applicable to the forum defendant rule, aligning with the congressional intent to allow out-of-state defendants to avoid bias in state courts. Plaintiffs cannot undermine this purpose by including a non-diverse defendant without a viable claim against them, nor can they include a local defendant with whom they have no legitimate claim. In both scenarios, the improperly joined defendant can be disregarded when assessing complete diversity and remand appropriateness.

Defendants argue that Patchin, as the primary actor in Ekeya's termination, cannot be liable for aiding and abetting the alleged wrongful act, asserting one cannot aid oneself. Additionally, they contend that since Patchin made the termination decision prior to Ekeya's protected activity, neither he nor Shriners Hospital can be liable for retaliation under Oregon law. Ekeya’s retaliation claim against Shriners Portland is based on Oregon statutes that require demonstrating engagement in protected activity, adverse treatment, and a causal connection between the two. The requirements for claims under both Or. Rev. Stat. 659A.030(l)(f) and 659A.199 are identical, necessitating proof of protected activity, adverse employment action, and a causal link to establish a prima facie case of retaliation.

Ekeya's second claim asserts that Patchin facilitated unlawful retaliation by Shriners Portland, violating Oregon law under Or. Rev. Stat. 659A.030(l)(g), which prohibits aiding or abetting unlawful employment practices. Defendants contend that this claim fails because Patchin, as the Hospital Administrator with executive authority, was the primary actor in the termination decision, and a person cannot aid and abet themselves. The court first examines the legal argument, referencing the Oregon Court of Appeals in Schram v. Albertson’s Inc., which affirmed that the statute encompasses both employees and employers, allowing for claims against employees who aid or abet unlawful actions. Although the Oregon Supreme Court has not directly addressed whether a primary actor can be liable for aiding and abetting, federal case law supports that allegations against such individuals can establish a claim. Notably, case law indicates that actions taken by a manager are on behalf of their employer, differentiating between acting as an employee versus acting as an employer. Thus, unless an employee is acting as the employer (e.g., in a sole proprietorship), they can still be liable for aiding and abetting unlawful practices as part of their supervisory role, consistent with the statute’s broad language. This interpretation permits claims against supervisors who take adverse actions against subordinates, as the statute does not explicitly preclude such claims.

Defendants reference two summary judgment cases to support their position regarding aiding and abetting claims. In **Hannan v. Business Journal Publications, Inc.**, the court partially granted summary judgment, dismissing Hannan’s aiding and abetting age discrimination claim against publisher Craig Wessel. U.S. Magistrate Judge Stacie Beckerman found that Wessel, as the primary actor in Hannan’s termination, could not be liable for aiding and abetting, since Hannan failed to present evidence disputing Wessel’s role as the decision-maker. The court adopted this recommendation.

In **Peters v. Betaseed, Inc.**, Chief Judge Ann Aiken granted summary judgment for Wickstrom, the president of Betaseed, on the aiding and abetting claim, distinguishing the case from **Gaither**. Here, Wickstrom's dual role as both manager and executive authority led to the conclusion that he could not aid and abet himself. Ekeya contends that Hannan and Peters were wrongly decided, arguing that the plain text of the statute does not clarify aiding and abetting liability when the primary actor is the employer's executive. The court noted that since this legal question remains unresolved at the appellate level, it cannot conclude that Ekeya's claims against Patchin are frivolous, which would be necessary for a finding of fraudulent joinder.

Furthermore, Ekeya has not yet conducted discovery to determine if Patchin was indeed the primary actor in Ekeya’s termination. While Patchin and Smith claim that Patchin made the termination decision, Smith's reference to "we" in discussions about severance raises questions about Patchin's sole authority in that decision.

Ekeya may have had her employment terminated following a decision made by Patchin on July 22, which involved seeking a severance exception and a release of claims prior to her termination. Smith's email on the same day indicates that a final decision had not been made regarding Ekeya's employment status, highlighting the conditional nature of the situation. Despite this, Ekeya continued her employment for over a month post-July 22. Following an incident in August 2016 involving alleged whistleblowing, Shriners Portland decided to terminate Ekeya without a severance exception or release. Patchin did not claim to have made this decision. The Employee Counseling Report from August 24, 2016, suggests that the termination recommendation required review by Human Resources, indicating that the decision to discharge Ekeya was not finalized until after her whistleblowing activity. Consequently, there remains a factual question regarding whether Patchin was the primary decision-maker in Ekeya’s termination, making it inappropriate to dismiss Ekeya's aiding and abetting claim against him as fraudulent joinder. Additionally, Defendants argue that if Patchin decided to fire Ekeya on July 22, it would negate her retaliation claims. However, the evidence does not conclusively support that an unconditional decision was made on that date, as the circumstances surrounding the termination and the timing of her protected activity remain contested. The lack of clear evidence substantiating Defendants' claim of fraudulent joinder means that the matter requires further discovery.

Plaintiff seeks attorney fees and costs associated with her remand motion, as permitted by 28 U.S.C. § 1447(c), which allows for such awards when removal is legally incorrect. The court has discretion in awarding fees, with no inherent bias for or against such awards, as emphasized in Martin v. Franklin Capital Corp. The Supreme Court advises that fees should deter improper removals while respecting defendants' right to remove cases when criteria are met. The standard for awarding fees hinges on whether the removing party had an objectively reasonable basis for seeking removal. The court found that the defendants lacked such a basis by determining that: 1) the recommendation for termination was contingent upon obtaining a severance exception and release; 2) communications indicated Ekeya's employment status was still uncertain; 3) the severance exception was not allowed; 4) protected activity occurred prior to the termination; and 5) the termination decision was made post-protected activity and required further review. Consequently, the court granted the plaintiff's request for reasonable attorney fees, remanded the case to the Circuit Court of Oregon, denied the defendants' motion to dismiss as moot, and retained jurisdiction for any future fee petitions. The excerpt also clarifies that the term "fraudulent joinder" does not imply dishonesty or deceit.

Key background facts stem from Plaintiff Kay Ekeya's complaint and supporting documents related to her motion to remand, along with declarations and concessions made during oral arguments. Patchin claims he decided to terminate Ekeya's employment on July 22, 2016, but evidence suggests he might have considered offering her severance in exchange for a release of claims. Further clarification of Patchin's decision awaits his deposition.

The Court's considerations revolve around the forum defendant rule and the concept of fraudulent joinder, particularly regarding pre-service removal by a forum defendant in diversity jurisdiction cases. The federal district courts are divided on whether this rule prevents such removals. However, in this case, there is congruence between the statutory language and congressional intent, affirming that the fraudulent joinder doctrine is relevant to the forum defendant rule.

Oregon law, specifically Or. Rev. Stat. 659A.030(1)(f) and Or. Rev. Stat. 659A.199(1), outlines unlawful employment practices, including retaliation against individuals for opposing unlawful actions or reporting violations. The Oregon Supreme Court has established that administrative rules related to these statutes hold the same weight as legislative enactments, as seen in Portland State Univ. Chapter of Am. Ass'n of Univ. Professors v. Portland State Univ. and Bronson v. Moonen.