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Seventh Circuit Finds no Evidence That Setting Salaries Based on Market Forces and Performance Evaluations was Pretext for Discrimination

Wednesday, January 25, 2012
Keeton v. Morningstar, Inc., No. 11-CV-2298, 2012 BL 10022 (7th Cir. Jan. 13, 2012)
  • Where the non-moving party fails to respond to the moving party's statement of uncontested facts supporting its summary judgment motion, the court will deem those facts admitted to the extent they are supported by evidence in the record.
  • To establish a Title VII retaliation claim, a plaintiff must demonstrate that she engaged in statutorily protected activity, performed her job to her employer's legitimate expectations, suffered an adverse employment action, and was treated less favorably than similarly-situated employees who did not engage in protected activity.
The U.S. Court of Appeals for the Seventh Circuit held that an African-American employee of Morningstar, Inc., failed to raise a triable issue concerning whether Morningstar's reliance on market forces and performance evaluations in setting and adjusting her salary was a pretext for race discrimination. The Court also held that plaintiff's retaliation claim failed because, prior to filing a discrimination charge with the Equal Employment Opportunity Commission (EEOC), the employee did not engage in protected activity, and after she filed her charge, Morningstar took no adverse action against her. Finally, the Court determined that the district court properly denied plaintiff's motion — filed 23 minutes before the district court entered judgment in Morningstar's favor — to submit papers in opposition to Morningstar's summary judgment motion.

Keeton Paid Less Than One of Her White Peers

Doris Keeton, an African-American, was hired by Morningstar as a Compliance Consultant in its legal department. The company also employed two other Compliance Consultants, Lisa Derner and Rita Bentzler, both of whom were white. When hiring new employees, Morningstar determined their initial salary offers based on market factors, including the availability of qualified candidates and the candidates' salary requirements. As a result, Keeton received a base salary of $68,000; Bentzler received $65,000; and Derner was paid $70,000. Subsequently, all three received salary increases. Keeton received the smallest increase because the other two employees had better performance reviews. As a result, Keeton's base salary was raised to $70,000, while Derner's salary was increased to $73,000; and Bentzler's to $70,150. Keeton and Bentzler each complained to management about the other, but neither raised any issues related to discrimination or retaliation. Morningstar did not discipline either employee as a result of the complaints. Four months later, Keeton filed a complaint with the EEOC, alleging that Morningstar discriminated against her on the basis of race by paying her less than a non-minority co-worker (Derner) who allegedly had less seniority and fewer qualifications. After receiving her right-to-sue letter from the EEOC, Keeton filed suit, alleging that Morningstar discriminated and retaliated against her in violation of Title VII of the Civil Rights Act of 1964 (Title VII), 42 U.S.C. § 2000e, et seq., for complaining about being treated differently than her white co-workers. In discovery, Keeton produced confidential emails sent and received by other Morningstar employees, including attorney-client privileged documents. Morningstar investigated to determine how Keeton acquired the documents and concluded that, although Keeton did not have the authority to access the emails and had used poor judgment in her use of surveillance software she had access to as part of her compliance responsibilities, she had not intended to violate company policy. Morningstar therefore took no disciplinary action against Keeton. Nevertheless, Keeton amended her complaint to allege retaliation based on Morningstar's actions in investigating the matter. Morningstar moved for summary judgment. After the deadline for filing opposition papers expired, and without requesting an extension of time to respond, Keeton's attorney filed a motion for leave to file his attached opposition papers. The motion was filed 23 minutes before the district court entered judgment in favor of Morningstar. See Keeton v. Morningstar, Inc., No. 10-CV-5502, 2011 BL 135993 (N.D. Ill. May 23, 2011). Later that day, the district court denied Keeton's motion as moot.

District Court Properly Denied Keeton's Late Motion to File an Opposition to Summary Judgment

Keeton first argued that the district court erred when it ruled that her motion for leave to file her summary judgment response was moot. According to Keeton, the case was not moot because her motion was filed before the district court granted judgment in favor of Morningstar. The Seventh Circuit, however, found that the district court did not find that the case was moot, but instead determined that Keeton's motion was procedurally moot because it was filed too late. Keeton also contended that the district court should have exercised its discretion to grant her an extension due to excusable neglect pursuant to Federal Rule of Civil Procedure 6(b)(1)(B). In her motion, Keeton's attorney listed 22 dates with a case or client name and court next to each date representing his obligations in other matters. Assuming that the attorney contended his obligations in the listed matters kept him from complying with the district court's deadline, the Court noted that "neglect due to a busy schedule is not excusable." Harrington v. City of Chicago, 433 F.3d 542, 548 (7th Cir. 2006). Counsel also contended that he had a medical emergency that impaired his ability to type, but the Court concluded that he failed to demonstrate that his illness was so severe that it prevented him from requesting an extension of time to file his response. Moreover, when the district court called counsel the day after his papers were due, counsel did not mention any medical problems and instead said that the response would be filed the next day. Thus, the Seventh Circuit held that the district court was within its discretion in refusing to allow Keeton's late filing.

Discrimination Claim Failed for Lack of Evidence of Pretext

Because Keeton failed to timely respond to Morningstar's statement of uncontested facts, the Seventh Circuit deemed those facts admitted to the extent that Morningstar's statement was supported by evidence in the record. Given the absence of direct evidence of discrimination, the Court employed the burden-shifting analysis set forth in McDonnell-Douglas Corp. v. Green, 411 U.S. 792 (1973), and focused on the question of pretext. Morningstar asserted that, at the time of hire, Keeton's base salary was lower than one of her peers because Morningstar set initial salaries based on market forces by offering all three Compliance Consultants more than they had been earning at their prior positions to induce them to come to Morningstar. The Court noted that market forces are a legitimate, non-discriminatory reason for differences in base salary for experienced, lateral hires. Further, the Court found that, when Morningstar increased the salaries of the three Consultants, it did so based on their performance reviews, another legitimate, non-discriminatory reason for the differences in pay. Because Keeton offered no evidence that any of Morningstar's explanations were a pretext for race discrimination, the Court held that her discrimination claim failed as a matter of law.

Retaliation Claim Properly Dismissed Because Keeton Did Not Engage in Protected Activity or Suffer Adverse Action

To establish her retaliation claim, Keeton had to demonstrate that she engaged in statutorily protected activity, performed her job to her employer's legitimate expectations, suffered an adverse employment action, and was treated less favorably than similarly-situated white employees who did not engage in that protected activity. The Court found that, prior to filing her EEOC charge, Keeton never complained to her employer that any actions taken against her were related to race. Thus, the Court held that Keeton could not show that she engaged in protected activity before she filed the charge. Keeton also alleged that, after she commenced her lawsuit, the company retaliated against her when it investigated her for misuse of Morningstar's email surveillance software. But the Court found that there was no evidence that the investigation was anything other than a legitimate attempt to discover whether Keeton had misused the software, and in any event, no adverse employment action was taken against Keeton as a result of the investigation. Accordingly, the Seventh Circuit affirmed the grant of summary judgment in Morningstar's favor on Keeton's retaliation claims.

Alternative Grounds for District Court's Decision

While the Seventh Circuit had no need to addresses the issue to affirm the dismissal of Keeton's action, the district court gave an additional reason for its finding that Keeton's discrimination claim was deficient. The district court had found that Keeton could not make the required showing that she was performing to Morningstar's legitimate job expectations in the context of the salary increases because Keeton's performance reviews reflected that she needed improvement in several areas, including cultivating better relationships. The district court also held that Morningstar's successful motion in limine to bar Keeton's possession and use of the confidential documents could not form the basis for a retaliation claim. DisclaimerThis document and any discussions set forth herein are for informational purposes only, and should not be construed as legal advice, which has to be addressed to particular facts and circumstances involved in any given situation. Review or use of the document and any discussions does not create an attorney-client relationship with the author or publisher. To the extent that this document may contain suggested provisions, they will require modification to suit a particular transaction, jurisdiction or situation. Please consult with an attorney with the appropriate level of experience if you have any questions. Any tax information contained in the document or discussions is not intended to be used, and cannot be used, for purposes of avoiding penalties imposed under the United States Internal Revenue Code. Any opinions expressed are those of the author. The Bureau of National Affairs, Inc. and its affiliated entities do not take responsibility for the content in this document or discussions and do not make any representation or warranty as to their completeness or accuracy.©2014 The Bureau of National Affairs, Inc. All rights reserved. Bloomberg Law Reports ® is a registered trademark and service mark of The Bureau of National Affairs, Inc.

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