MUNICIPAL ATTORNEYS NEWSLETTER

Missouri Municipal Attorneys Association

1727 Southridge Drive, Jefferson City, MO 65109                                      Editor Howard C. Wright

573-635-9134, Fax: 573-635-9009                                                                   Asst. Editor Ragan Wright

December 08, Issue #12-08

CASE OUTLINES (MISSOURI)

Unforgiven. The mayor of Holden, Mo., appointed his brother-in-law Larry Miller as chief firefighter. The mayor learned that this appointment violated the anti-nepotism provision in the Missouri Constitution that provides that: “Any public officer or employee in this state who by virtue of his office or employment names or appoints to public office or employment any relative within the fourth degree, by consanguinity or affinity, shall thereby forfeit his office or employment.” The mayor asked for the resignation of his brother-in-law who resigned. A complaint was filed with the Missouri Ethics Commission. The Attorney General (AG) then notified the mayor stating that if the mayor did not resign AG would file a quo warranto action to oust the mayor. The mayor resigned and the City Council reappointed him as mayor to serve the balance of his unexpired term. The Attorney General filed a quo warranto action to oust the mayor that was granted by the circuit court. On appeal to the Western District, the court held that the rescinding of the appointment, and the mayor’s resignation and his reappointment to the unexpired term did not cure the violation because the constitutional prohibition applies to the entire term of the mayor. State ex rel. Nixon v. Wakeman, (WD69271, 10/28/08).

     Comment Howard: Once the appointment is made it is impossible to mitigate as this case shows. Proactive education of public officials is about the only way to prevent this from happening. Years ago, Springfield adopted a code of ethics requiring each new city councilmember and board member to read and certify to the city clerk prior to taking office that he or she has read the code of ethics and has had an opportunity to ask questions. The constitutional provision on nepotism is set forth in the code of ethics with a statement that before participating in the appointment of a relative within the fourth degree of consanguinity or affinity the public official needs to review this action with the city attorney.

Cause of Action for Pregnancy Discrimination. Carol Self (Employee) was an employee of Midwest Orthopedic (Employer). She worked at home as a coding/billing coordinator. Employee became pregnant and informed her Employer. During the pregnancy, she developed complications, was hospitalized, and released to continue her work at home. Later she was readmitted to the hospital for monitoring during the rest of her pregnancy and with approval of her Employer she was allowed to continue to work from the hospital, working some 30 hours per week. She was then required to lie down and could not work but later recovered informing her Employer who did not voice any concerns. On April 11, 2006, Employee received a call from her Employer telling her that due to her work, revenues were increasing for the company; but, in spite of her work her services would no longer be required and she was terminated on May 1, 2006. Employee filed a complaint with the MHRC and was given a right to sue letter. She filed suit in circuit court and the court in response to a motion to dismiss for failure to state a claim by the Employer, dismissed the case. On appeal to the Western District, the decision was reversed based on the Western District’s reading of an earlier Missouri Supreme Court decision that a person claiming dismissal due to pregnancy states a cause of action. Self v. Midwest Orthopedics Foot & Ankle, (WD68977, 10/28/08).

     Comment Howard: Employer argued that this was a case of first impression and while the Western District found authority in an earlier Supreme Court decision this case puts to rest for now the claim that there was no cause of action for employer discrimination based on pregnancy. The opinion of Western District has an excellent discussion of the case law in this area.

AIRPORT SECURITY IS A GOVERNMENTAL FUNCTION. Donald Thurman was an employee of the city of Kansas City (City) who served as an armed security guard for the Kansas City Airport (Airport). As part of his employment, Thurman was provided a handgun which he was allowed to retain in his possession when he was not on duty at the Airport. The Kansas City Board of Police Commissioners (Board), an agency of the state of Missouri, provides screening, testing, and licensing related to the City’s security employees. In November of 2002, Thurman used his handgun to shoot and kill Rhonda Wolf at her apartment in Kansas City. Suit was filed for wrongful death by members of the Wolf family alleging negligent entrustment and that the City was performing a proprietary function for the special benefit and profit of the City. A claim was also asserted against the Board for negligent screening of Thurman and that the Board carried liability insurance covering the incident. The City filed a motion to dismiss with supporting affidavits alleging it was protected by sovereign immunity and that no insurance existed that waived sovereign immunity. The Board filed a motion for summary judgment. The circuit court sustained the City’s motion to dismiss and the Board’s motion for summary judgment. Plaintiffs appealed to the Western District. With respect to the City’s motion to dismiss, the court determined that the City was protected by sovereign immunity because providing security at the Airport is a governmental function even though other airport functions could be proprietary. However, additional evidence was needed to determine if the City had waived sovereign immunity even though the motion had attached thereto affidavits and copies of existing insurance policies showing there was no insurance. The City should have converted its motion to dismiss into a motion for summary judgment. The matter is remanded to allow the plaintiffs an opportunity to show there was a waiver of sovereign immunity through the purchase of insurance. With respect to the Board’s motion for summary judgment concerning negligent, screening the plaintiff’s assert that state regulations require that persons who are licensed purchase insurance and that this required the Board to assure that Thurman be insured. The court held that the state regulations could not require the Board to purchase insurance overriding state law that authorized the Board to make this decision in its discretion. Gregg, et al., v. City of Kansas City, Missouri, et al., (WD68989, 10/28/08).

     Comment Howard: To determine if an activity is governmental you look to the function that is being performed which was airport security. In this case, the action of the employee took place outside of the work place and seemingly had nothing to do with providing security at the Airport except Employee was allowed to carry a gun while off duty. So how does a random act of an employee while off duty relate to providing security at the airport? It seems that once under the umbrella based on the function the employee was hired to perform, the city has no liability for random, non-related actions of its employees that do not appear to be related to providing security at the airport.

INCREASE IN REVENUES FROM HIGHER ASSESSED VALUATION DID NOT VIOLATE HANCOCK AMENDMENT. Taxpayers sue Franklin County (County) alleging a violation of Article X, Section 22(a) of the Missouri Constitution (hereinafter referred to as “22(a)”) also known as the Hancock Amendment based on an increase in revenues due to a higher assessed valuation in the County. The assessed valuation in the County went up slightly due to an increase in the valuation of property while the tax rate stayed the same. The increase in the revenues due to reassessment of property was only 0.7117 percent, which was far less than the “inflationary growth factor” allowed by Section 137.073.2 RSMo. Taxpayers asserted that Section 137.073 violates, 22(a) of the Missouri Constitution. The trial court found for the County and the taxpayers appealed to the Missouri Supreme Court. The Supreme Court held that 22(a) does not prohibit an increase in revenues due to an increase in the assessed valuation unless the increase in revenues, from the increase in the assessed valuation, is more than the general price level. Section 22(a) has two separate provisions the first of which prohibits an increase in a levy for a tax, fee, or license without a vote of the people. In this case, there was no increase in the levy, just an increase in revenues from a higher assessed valuation some of which was the result of reassessment of property; therefore, the first sentence of Section 22(a) was not violated because this sentence “concerns only situations in which the rate of tax levy is increased.” Furthermore, “Increases in revenue that do not result from an increase in the levy do not violate the prohibitions of Section 22(a), even if a particular taxpayer’s liability is increased, except in the narrow classes of cases set out in the second and third sentences of Section 22(a) which allows an increase in the assessed valuation provided it does not exceed an increase in the general price level. Taxpayers also argued that the General Assembly exceeded its authority by enacting Section 137.073.2 RSMo requiring a rollback if the increase in the revenues exceeds 5 percent or the consumer price index, whichever is the lesser. The Court noted that this argument is misplaced because the Missouri Constitution reserves all power to the General Assembly not otherwise limited by the Missouri or United States Constitutions. Franklin County, Missouri ex rel. Parks and Ming v. Franklin County Commission, et al., (SC89114).

     Comment Howard: This is an important case in understanding the structure of Section 22(a) of the Hancock Amendment. The language in the second sentence of Section 22(a) provides: “If the base of an existing tax, fee, or license is broadened, the maximum authorized current levy of taxation on the new base … shall be reduced to yield the same estimated gross revenues as on the prior base.” The language about broadening the base in the second sentence has always been perplexing. This opinion clearly states that the second sentence about broadening the base does not modify the first sentence of Section 22(a) that deals with a levy, which is an imposition of a tax. The Court also makes another point that has been a continuing source of confusion to property rights and anti-tax advocates, which is that the Missouri Constitution reserves to the General Assembly all power not restricted by the Missouri or the United States Constitutions. In short, if there is no restriction in the Constitutions, the General Assembly has the power to enact legislation.

WHEN DOES THE PROBATIONARY PERIOD END? The University of Missouri (Employer) hired Fransk (Employee) as an assistant director of sports and competition on February 16, 2006. Under the University’s Human Resources Policy Manual (Manual) employees serve, a six-month probationary period that could be extended by an additional three months. The Employee’s probationary period was extended by an additional three months period which ended on November 15, 2006. The Employer wrote the Employee a letter on November 7, 2006, stating that the Employee would be terminated and instructed him to go home and not return to work. This letter further stated that the Employee would be paid “up to and including the last day of November 16, 2006,” one day after the probationary ended. Employee did not report to work after the letter of November 7, 2006. On November 17, 2006, the Employee filed a grievance alleging violation of the Manual contending that his probationary period ended on November 15, 2006, and on November 16, 2006, he was a non-probationary employee and had a property right in his employment; therefore, he was entitled to due process under the Manual with respect to his termination. The Employee availed himself of the grievance procedures under the Manual which was initially entertained by the Employer; however, the Employer eventually concluded that the Employee was, at the time of his termination, still a probationary employee denying his grievance on the grounds that he did not have any rights because he was a probationary employee at the time of his dismissal. Employee filed suit in circuit court and the Employer filed a motion to dismiss that was sustained. On appeal to the Western District, the trial court’s decision was upheld. The court concluded that the Employee did not have a reasonable expectation of continued employment under the facts in this case. Fransk v. Curators of the University of Missouri, (WD69173, 11/12/08).

     Comment Howard: This case is a good starting point if you were looking for cases on the issue of when a probationary period ends. The opinion covers the waterfront on this subject distinguishing cases that ruled for the employee when his or her employment was extended beyond the probationary period.

Juries and Judges Show Zero Tolerance for Sex Discrimination. Occasionally you read a case that sends a very loud and clear message. Lynn v. TNT Logistics North America Inc., et al. (WD68096, 11/07/08), is such a case. This case involved a complaint of sex discrimination by Kendra Lynn (Employee) against TNT Logistics North America (Company). Employee worked as an assembly line scanner for the Company at one of its Kansas City plants for about 16 months before she was terminated. Gill her supervisor made a number of lewd comments and actions with respect to the Employee that were witnessed by other employees. The Employee complained to another shift supervisor who reported the complaint to the manager of the facility. There were five separate reported incidents and no action was taken against the supervisor for his conduct for any of those incidences. Even though the Company had policies in place to deal with discrimination, the Company did not train its employees with respect to these policies, nor did it investigate discrimination complaints. In fact, none of the managers or employees had any training on handling discrimination complaints. This was a Company that had four plants in the Kansas City area with 175 employees at the plant where Employee worked and over 100,000 employees nationwide. In this case, the only step the Company ever took with respect to the complaint of sex discrimination was to move the Employee to another shift which started at 2:00 a.m., in the morning. After the filing of a complaint with the MHRC, the Company finally investigated the matter and back dated employee reports of the incident. The Employee was fired after she filed her lawsuit resulting in a separate claim for retaliation. Employee was described by her supervisors as one the Company’s top employees. The Company’s overall conduct constituted “reckless indifference” making the Company subject to punitive damages. The jury returned a verdict of compensatory damages in the amount of $50,000 and punitive damages in the amount of $6.76 million. The trial court reduced the punitive damages to $450,000, employing a punitive-to compensatory damages ratio of 9:1. The Employee appealed the reduction of the damages and the Company also appealed except for the verdict involving retaliation. The Western District concluded that the portion of the judgment granting remittitur should be reversed because the Employee was not afforded the choice of a new trial on the issue of punitive damages. The Western District took control of the issue of punitive damages noting the egregious actions of back dating of records by the Employer to conceal its handling of Lynn’s harassment and not reducing a fellow supervisor’s report to a memorandum. In addition, the Employer did nothing to correct the discriminatory actions until after the Employee filed suit. The Western District concluded that the remittitur adopted by the trial court did not take into account the reprehensible conduct of the Employer holding that the correct amount should have been $3.75 million. In addition, the Employee was awarded prejudgment interest on one-half of the $3.75 million since the state got one-half of the punitive damages. The Employee was granted 15 days to accept the Western Districts Courts remittitur and if she accepted the trial court was ordered to enter judgment accordingly. If the Employee did not accept the remittitur within the 15 days the case is remanded for a new trial on the punitive damages. Lynn v. TNT Logistics North America Inc., et al., (WD68096, 11/07/08).

     Comment Howard: This is an extraordinary case showing that juries, trial court judges, and appellate judges have zero tolerance for disgraceful actions of employers in discrimination cases. The Western District literally took over this case wielding extraordinary judicial power to punish the Company for its egregious actions. The lesson is that it is not enough to have anti-discrimination policies in place – you must take steps to actively enforce these policies. In fact, if the Company had immediately conducted a proper investigation and disciplined its Employee, the Company may well have avoided a judgment well in excess of $4 million.

No Waiver of Sovereign Immunity by Purchasing MOPERM Insurance Policy. Topps was an at-will employee of the city of Country Club Hills (City) from May 21, 2001, to April 2, 2004, when she voluntarily resigned her position as city clerk. Topps alleged she experienced whistle blower retaliation after reporting alleged “inappropriate and unethical business practices and violations of policies and procedures” by the City. She further alleged that she was “forced to resign” and was “constructively terminated” when she left her position. The City filed a motion for summary judgment after an earlier trial court’s decision (Topps 1) was reversed by the Eastern District based on Kunzie v. City of Olivette on the grounds that there was an insufficient factual record regarding the MOPERM coverage. After the reversal in Topps 1, the trial court sustained the City’s motion for summary judgment on the grounds that the City was protected by sovereign immunity for whistle blower retaliation and it had not waived this defense by purchasing MOPERM insurance. Examination of the MOPERM policy disclosed that the City had not waived sovereign immunity by its purchase of insurance. Topps appealed to the Eastern District, which upheld the trial court granting of the City’s motion for summary judgment. The sole issue on appeal was whether the purchase of the MOPERM insurance waived the defense of sovereign immunity. Careful examination of the MOPERM policy disclosed no waiver. The MOPERM policy had no specific language for coverage of Topp’s whistle blower claim and while federal employment claims are covered under the MOPERM policy, other claims are excluded by the express language of the policy which provides that the coverage is not extended to the City for any of its governmental functions except for the operation of motor vehicles and the dangerous condition of the City’s property. Topps v. City of Country Club Hills, (ED91509, 11/18/08).

     Comment Howard: If you are looking at an insurance policy other than the MOPERM policy to determine if you have waived sovereign immunity this is the case to start your review.

FEDERAL CASES

Hell, Fire, and Damnation on Your Funeral. Phelps-Roper (Roper) is a member of a church (Church) that believes that God is punishing America for what the Church considers the sin of homosexuality by the killing of Americans including soldiers. As part of her religious duties Roper believes funerals are the only place where her religious message can be delivered in a timely and relevant manner. In response to picketing by church members at the funerals of soldiers who have died while in the service of their Country, the Missouri General Assembly passed legislation criminalizing the picketing of funerals “in front of or about” a funeral location or procession within 300 feet of the funeral location or procession. The U.S. District Court denied a request for an injunction and Roper appealed to the 8th Circuit. The 8th Circuit reversed on the grounds that Roper was likely to succeed with respect to her request for an injunction although the Court did not reach the merits leaving that for the district court; therefore, Roper was entitled to an injunction against the enforcement of the Act until the district court ruled on the merits. First, the Court decided that on the face of it the legislation was content neutral. While a cemetery may be private, the statute regulates activity in areas that are traditional “public fora” like roads and sidewalks; therefore, the statute must satisfy the standard for traditional public fora. Applying this standard, the court determined that it was likely that Roper would succeed with respect to her request for an injunction. The court rejected Missouri’s comparison to picketing statutes that have upheld limitations on picketing in front of homes relying on language in a Supreme Court decision that the home was different and in the opinion of the 8th Circuit is unique. The court also refused to follow another circuit court of appeal’s decision that accepted and extended the “home” analogy, distinguishing the language in the statutes. While the court did not reach the merits of the statute, it certainly showed its hand by citing a number of cases which provided a road map for the district court to follow in reaching the merits of this case. The decision was reversed and injunction was granted to enjoin the enforcement of the statute until the district court reaches the merits of the case. Phelps-Roper v. Nixon, (8th Cir. No. 07-1295, 10/31/08) .

     Comment Howard. It is hard to imagine a more personal matter than a funeral where friends and loved ones gather to mourn, honor, and lay to rest their friend or relative. In this moment of personal grief or solace there needs to be a sense of personal privacy and respect. It is equally hard to imagine a more offensive act than picketing under these circumstances. Of course, shock, awe, and disbelief are the goals of those who picket funerals under these circumstances. I watch this case with great interest hoping the Supreme Court will consider this matter in order to provide guidance in this area even if the bill passed by the General Assembly was not well drawn.

Black Listing of Contractor Upheld. In 1999 and 2000, Heritage Construction Company (Company) had a contract with the city of Greenwood (City) to build a wastewater treatment plant in which a dispute arose where the Company invoked the arbitration provision in the contract – the alleged First Amendment right. The Company lost the arbitration. In 2005, the City took bids for a water plant. The Company was the lowest bidder nevertheless the City awarded the bid to the second lowest bidder on the grounds that the City awarded the contract to the lowest responsible bidder, due to past adverse experience involving defective performance and extended litigation. Company sued alleging a violation of its civil rights under, 42 U.S.C. 1983 because it exercised its right of free speech to petition by initiating arbitration on the earlier contract. The district court granted the City’s motion for summary judgment and the Company appealed to the 8th Circuit. The 8th Circuit held that the right of the Company to petition for arbitration under the earlier contract was a “pre-existing commercial relationship“ and was not a matter of “public concern” as defined and required by the free speech cases. The Company did not allege that its arbitration was a matter of public concern; therefore, the district court properly granted summary judgment. In addition, the Company did not show that it was a “regular provider of services” to the City as required by the Supreme Court. Heritage Constructors, Inc. v. City of Greenwood, (8th Cir. No. 08-1344, 09/26/08).

     Comment Howard: The Court refused to extend United States Supreme Court cases where the government retaliated against the contractor by terminating the contract or where the contractor was a “regular provider of services.” This case is a good primer on issues where the City takes action to terminate or black list a contractor.

Legislation and Other Matters

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