Court allows wrongful discharge claim against supervisor to proceed

Federal courts occasionally get asked to decide novel questions of state law. They have two options when that occurs: (1) certify the question to the state’s highest court; or (2) predict how the state’s highest court would decide the question and apply that prediction as the rule of decision.

Judge Rice went the second route in an employment case last week. His ruling expands the scope of supervisor liability under Washington law.

Chris Blackman was the principal of Omak Middle School from April 2016 to November 2017. According to her complaint, Ms. Blackman was fired after she complained to her supervisor about illegal spending of school funds and suspected violations of Washington’s wage and hour laws.

Ms. Blackman sued her supervisor, Dr. Erik Swanson, for the common law tort of wrongful discharge in violation of public policy. Ms. Blackman asserted this claim on a whistle-blowing theory, alleging that Dr. Swanson retaliated against her for sounding the alarm about unlawful conduct.

Dr. Swanson challenged the claim in a 12(b)(6) motion, arguing that Washington law does not allow supervisors to be held individually liable for wrongful discharge in violation of public policy.

This was an issue of first impression. With no Washington precedent to apply, Judge Rice focused on how the Washington Supreme Court would decide the question. See Giles v. General Motors Acceptance Corp., 494 F.3d 865, 872 (9th Cir. 2007) (“Where the state’s highest court has not decided an issue, the task of the federal courts is to predict how the state high court would resolve it.”). His conclusion: that supervisors can be individually liable for terminating an employee in a manner that contravenes public policy.

The Court concludes that the purpose of the wrongful discharge tort — namely, the deterrence of discharge in violation of public policy — is best served if individual employees, particularly those in a position of power, are held personally liable for conduct that violates public policy and effectuates another employee’s termination. In a wrongful discharge case, the tortious act is not the discharge itself; rather, the discharge becomes tortious by virtue of the wrongful reasons behind it. As such, where those tortious reasons arise from the unlawful actions of the individual effecting the discharge, he or she should share in liability.

So there you have it. Supervisors can be individually liable for wrongful discharge in violation of public policy.

The case is Chris Blackman v. Omak School District, et al., Case No. 18-CV-0338-TOR. Blackman is represented by Mike Love and Matthew Crotty. The defendants are represented by Jerry Moberg and James Baker.

No irreparable harm means no injunction for Richland produce storage warehouse

It’s the commercial litigation version of “get off my lawn!” Intrigued? Read on.

Preferred Freezer Services operates a produce storage warehouse in Richland, Washington. Richland residents are well-acquainted with the facility; the building stands 120 feet tall and clocks in at 455,000 square feet. The local business journal says that the building — essentially a gargantuan freezer — “dominates the north Richland landscape.”

More than two billion pounds of produce pass through Preferred Freezer’s warehouse each year. That’s an enormous amount of produce. We’ll do some quick math to put that number in perspective. Two billion pounds per year equates to 5.4 million pounds per day. Our trusted friend Google informs us that a semi truck can haul about 50,000 lbs. of produce. So, picture 108 semis worth of fruits and veggies coming in and out of the warehouse each day. (5.4 million / 50,000 = 108 semis).

Does Preferred Freezer actually use semis to move all those fruits and veggies? No! That would be a nightmare. It uses rail cars instead.

The rail cars arrive on trains pulled by carriers like Union Pacific, and are then diverted onto a system of private tracks owned by Preferred Freezer. The company’s private tracks run right up to the warehouse, which makes loading and unloading the cars easy peasy.

But wait, you say. How do the rail cars get from the main track onto Preferred Freezer’s private tracks? Surely that’s a bit more complicated than you’re making it sound. Ok, fair question. It is rather complicated.

For purposes of this post, all you need to know is that Preferred Freezer contracts with a local railway operator, Tri-City Railroad Company (“TCRY”), to handle that task. TCRY shuttles the cars from the main track, onto Preferred Freezer’s private tracks to be loaded or unloaded, and then back onto the main track.

Preferred Freezer and TCRY had a falling out last year. The reasons aren’t especially important, so we won’t bore you with them. What is important is what happened as a result of the fallout. From what we can discern from the parties’ filings, the short story is that TCRY left several of its full-size locomotives just sitting on Preferred Freezer’s tracks. Preferred Freezer asked TCRY to move them, but TCRY refused.

Preferred Freezer moved for injunctive relief, asking Judge Bastian to order TCRY to move the locomotives. TCRY opposed the motion, arguing that it is entitled to “exclusive use” of the private tracks under the parties’ contract.

Judge Bastian denied the motion in a short, three-page order. Two factors were central to his decision. First, he ruled that Preferred Freezer failed to meet the heightened standard for so-called “mandatory injunctions” that alter the status quo by requiring a party to do something (as opposed to refraining from doing something). Second, Judge Bastian concluded that Preferred Freezer had not shown that it would be irreparably harmed. While not stated expressly, the order suggests that money damages would be an adequate remedy for Preferred Freezer if TCRY is proven to have wrongfully occupied the tracks with its locomotives.

This decision serves as a reminder that injunctive relief is reserved for truly extraordinary situations when no other remedy will do. Showing that you have a strong case is not enough. You have to go the extra mile and prove that money damages won’t be sufficient — especially if you are asking for an order that alters the status quo by requiring the other side to take action.

Preferred Freezer seems to have a pretty legitimate beef about TCRY using its tracks for an improper purpose. But its failed bid for injunctive relief was not a good way to start the case. We’ll continue to monitor the case and let you know what transpires.

The case is Tri-City Railroad Company, LLC v. Preferred Freezer Services of Richland, LLC, Case No. 19-CV-00045-SAB.

No preliminary injunction for plaintiff challenging DACA non-renewal, but APA claim will proceed

Christian Garcia Herrera was brought to the United States from Mexico when he was one year old. In 2013, after graduating from high school and taking a job as a wildland firefighter, he was granted deferred action status under the DACA program.

Mr. Garcia Herrera’s DACA status was renewed in 2015 and 2017. When he applied for a third renewal in 2018, however, his application was denied. The denial letters he received from USCIS did not explain why the application had been denied; they simply stated that USCIS had exercised its discretion not to renew his DACA status.

Mr. Garcia Herrera filed a complaint challenging the non-renewal under the Administrative Procedure Act (APA). His primary contention was that USCIS had summarily denied his application without giving him “case-by-case consideration” (thereby making the decision arbitrary and capricious in violation of the APA). Mr. Garcia Herrera promptly moved for a preliminary injunction barring USCIS from revoking his DACA status.

In an order issued yesterday, Judge Rice declined to issue a preliminary injunction. Central to his decision was the fact that the record was devoid of evidence that the application had been denied in summary fashion. Based on that lack of evidence, Judge Rice ruled that Mr. Garcia Herrera was not likely to succeed on the merits of his APA challenge “at this time.”

The phrase “at this time” is intriguing. It seems to suggest that Mr. Garcia Herrera will be allowed to take discovery to determine precisely how his application was processed. If he discovers that USCIS made a procedural misstep (e.g., by failing to adhere to DHS’s National Standard Operating Procedures for DACA adjudications), he may be in business on his APA claim.

The case is Garcia Herrera v. McAleenan, Case No. 19-CV-0094-TOR. Garcia Herrera is represented by Clayton Cook-Mowery of the Quiroga Law Office. The government is represented by Rudy Verschoor of the U.S. Attorney’s Office.

UPDATE: Judge Rice’s decision has been selected for publication in the Federal Supplement. The Westlaw citation for the decision is Herrera v. McAleenan, — F.Supp.3d —, 2019 WL 2030125 (E.D. Wash., May 8, 2019).

PUD moves for summary judgment in case challenging higher electricity rates for blockchain miners

Grant County, Washington is a hotbed for blockchain mining. Not sure what that is? Here is a definition and a more detailed explanation.

Blockchain mining requires enormous amounts of electricity. Electricity costs money. Blockchain mining is thus enormously expensive from an electricity standpoint.

Grant County PUD No. 2 (PUD) generates a lot of cheap electricity through its hydroelectric dams on the Columbia River. That has historically made Grant County an attractive place for blockchain miners to set up shop. The past few years have seen a massive influx of large-scale mining operations. The influx—and the corresponding problems it has created for local communities—has been well-documented.

Faced with skyrocketing demand for its electricity and increased strain on its infrastructure, the PUD took action. Last year, it created a new rate class for businesses in “evolving industries.” The new rate is considerably higher than the rate paid by ordinary business and residential customers.

The blockchain miners were predictably upset. Several banded together to challenge the new rate class in a lawsuit filed last December. Their complaint alleges that creating a new rate for businesses in “evolving industries” was arbitrary and capricious and violates due process.

The PUD filed a motion for summary judgment today. A hearing has been scheduled for June 27, 2019, in Spokane.

The plaintiffs were denied a preliminary injunction two months ago, with Judge Peterson questioning whether they were likely to succeed on the merits. That would seem to bode well for the PUD on summary judgment. On the other hand, it seems clear that the PUD singled out blockchain miners for higher rates. It will ultimately need to show that it had the legal authority to do so.

UPDATE 6/11/19 — Judge Peterson has deferred a ruling on the PUD’s summary judgment motion under Rule 56(d) to afford the plaintiff an opportunity to take discovery. A new hearing date has not been set.

The case is Blocktree Properties, LLC, et al. v. Public Utility District No. 2 of Grant County, Case No. 18-CV-0390-RMP.

ADA case involving unleashed service dog will proceed to trial

Do service animals need to be kept on a leash? It all depends on whether their owners are capable of holding a leash. That was Judge Rice’s conclusion in a summary judgment order issued late last week.

Cheryl Olson came to the AARP Foundation in Spokane for help finding a job. She arrived with her service dog, Boomer, whom she relied on for mobility assistance. The Foundation welcomed Ms. Olson and Boomer with open arms.

For months, everything went fine. Ms. Olson made regular visits to the Foundation’s office with Boomer by her side. She met with her job coach, received training, and submitted job applications. Boomer waited, lying patiently on the floor.

(This is not Boomer. But the visual is spot-on.)

But Boomer lying on the floor proved to be controversial. Some of the Foundation’s staff complained that Boomer posed a tripping hazard in the Foundation’s cramped quarters. The Foundation responded by asking Ms. Olson to keep Boomer on a leash at all times.

In theory, the Foundation was on solid footing in requesting that Boomer be kept on a leash. Title III of the Americans With Disabilities Act requires that service animals be kept “under the control” of their handler. The applicable regulation expressly references the use of a leash:

A service animal shall be under the control of its handler. A service animal shall have a harness, leash, or other tether, unless either the handler is unable because of a disability to use a harness, leash, or other tether, or the use of a harness, leash, or other tether would interfere with the service animal’s safe, effective performance of work or tasks, in which case the service animal must be otherwise under the handler’s control (e.g., voice control, signals, or other effective means).

28 C.F.R. 36.302(c)(4).

The problem was that Ms. Olson suffered from degenerative disc disease and rheumatoid arthritis that made it difficult for her to hold Boomer on a leash. She explained that problem to the Foundation, but the Foundation held firm. It refused to allow Ms. Olson to visit its offices unless Boomer was leashed at all times.

Ms. Olson brought claims for failure to accommodate under Title III of the ADA, Section 404 of the Rehabilitation Act, and the Washington Law Against Discrimination (WLAD). Both parties moved for summary judgment.

In an order issued last week, Judge Rice unleashed the case for trial. He ruled that Ms. Olson’s claims were viable to the extent she required an accommodation for her “inability to hold the leash of her service dog.” Judge Rice ruled that a factfinder would need to decide whether Ms. Olson had properly requested such an accommodation — and, if so, whether the Foundation could have reasonably accommodated her.

Ms. Olson’s attorney, Paul Stewart, said his client was pleased with the decision. “The Court’s ruling showcased its thoughtful consideration of the issues,” Stewart said. “Ms. Olson had hoped the Court might rule that the leash policy violated the ADA and WLAD as a matter of law, but it stopped short of doing so.  Nonetheless, her liability case remains strong.  We look forward to taking the case to trial.”

The case is Olson v. AARP, Inc., et al., Case No. 17-CV-0426-TOR. Olson is represented by Paul Stewart and Alex Wilson of Paine Hamblen, both of whom are serving as appointed pro bono counsel through the Eastern District of Washington’s Pro Bono Program. To join the panel of attorneys who are invited to accept pro bono appointments, contact Kammi Mencke Smith, President of the EDWA Federal Bar Association, at kms@winstoncashatt.com.

$17 million class action settlement approved in Nationstar Mortgage case

Judge Rice has granted final approval of a $17 million settlement in a long-running class action against Nationstar Mortgage. The settlement benefits Washington homeowners who defaulted on their loans with Nationstar and who were locked out of their homes prior to a foreclosure sale.

What was the case about? The case arose from Nationstar’s occasional practice of locking homeowners out of their homes before their properties were formally foreclosed upon. The court ruled that this practice amounted to common law trespass and violated the Washington Consumer Protection Act. The certified class consisted of all Washington homeowners who were subject to this practice from 2008 to 2016.

What are the settlement terms? The settlement calls for Nationstar to pay $17 million into a settlement fund. Roughly $13 million will be distributed to class members in the form of cash payments. The remaining $4 million will be paid to class counsel to cover attorneys’ fees and costs.

Are the settlement terms fair? The million-dollar question! Judge Rice held a fairness hearing and performed a detailed fairness inquiry under Federal Rule of Civil Procedure 23(e). He concluded that the payments to class members were fair and reasonable. He also concluded that the $4 million payment to class counsel was reasonable under the Ninth Circuit’s 25% benchmark approach.

Was there anything unusual about this case? Yes. A significant number of the class members (262) filed for bankruptcy during the class period. Under bankruptcy law, those class members’ claims were assets of their bankruptcy estates. That posed a tricky administrative issue: should those class members’ payments be made to the class members themselves, or to the trustees of their bankruptcy estates?

Judge Rice appointed a special master to tackle this issue. The special master divided the bankruptcy cases into different categories based upon the type of case (Chapter 7, Chapter 11, or Chapter 13), and the amount of unused exemptions that were available to each class member. Notice of the proposed settlement was then provided to the United States Trustees for each of the districts in which the bankruptcies were filed, as well as the bankruptcy trustees responsible for administering the individual cases.

Ultimately, the vast majority of the payments wound up going to the class members themselves. The bankruptcy trustees only claimed the payments in 13 of the cases.

This issue is admittedly a bit dry. But it does matter to the bankruptcy bar. The U.S. Trustee for the Eastern District of Washington, Gary Dyer, will be presenting on the interplay between class action awards and bankruptcy filings at the Eastern District of Washington’s Annual Bankruptcy Seminar and Retreat at Sun Mountain Lodge on June 28-29.

The case is Jordan v. Nationstar Mortgage, LLC, Case No. 14-CV-0175-TOR.