Joan McCray v. Annie Carter

NOT RECOMMENDED FOR FULL-TEXT PUBLICATION
File Name: 14a0483n.06

No. 13-1515

UNITED STATES COURT OF APPEALS
FOR THE SIXTH CIRCUIT

JOAN MCCRAY, FILED
Jul 03, 2014
Plaintiff-Appellant,
DEBORAH S. HUNT, Clerk
v.

ANNIE CARTER; TERRY
CATCHINGS; MARVIS COFIELD; ON APPEAL FROM THE UNITED
JOYCE V. HAYES-GILES; OTIS STATES DISTRICT COURT FOR THE
MATHIS, III; DAVID MURRAY; EASTERN DISTRICT OF MICHIGAN
CARLA D. SCOTT; IDA SHORT;
MARIE L. THORNTON; TYRONE
WINFREY; JIMMY WOMACK;
DETROIT BOARD OF EDUCATION,

Defendants-Appellees.

BEFORE: MERRITT, MOORE, and CLAY, Circuit Judges.

CLAY, Circuit Judge. Plaintiff Joan McCray appeals the district court’s grant of

summary judgment in favor of Defendants, the Detroit Board of Education (“Board”) and its

members from 2007 to 2008, on Plaintiff’s claim of retaliation in violation of Michigan’s

Whistleblowers’ Protection Act (“WPA”), Mich. Comp. Laws § 15.362. For the reasons set

forth below, we AFFIRM in part, REVERSE in part, and REMAND.

BACKGROUND

I. FACTS

Detroit Public Schools (“DPS”) is the school district responsible for educating the city’s

children. The Board is DPS’ elected governing body. During the time period relevant to this
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suit, 2007 to 2008, DPS had about 16,000 employees, more than 200 schools, and an annual

budget of approximately $1.2 billion. It also had more than its fair share of troubles. By the

summer of 2007, the FBI had begun investigating misappropriations of federal funds by the head

of DPS’ risk management department. A 2005 bond issuance required DPS to produce a deficit

elimination plan and issue monthly reports with detailed financial information. One Board

member described DPS’ predicament as “hell.” (R. 60-3, Calloway Dep., at 1578.)

A. Calloway and Plaintiff Begin at DPS

It was in this climate that the Board hired Dr. Connie Calloway to be the Superintendent

of DPS, beginning on July 1, 2007. Before she took over at DPS, Calloway was the

Superintendent of a school district that covered areas outside of St. Louis, Missouri. Calloway

recommended that Plaintiff, her Chief Financial Officer, accompany her to act as the CFO of

DPS. DPS would be a change from Calloway’s and Plaintiff’s former jobs. Their former school

district was much smaller than DPS—eight schools versus DPS’ 200, with a much smaller

budget. But competition for the job as DPS’ CFO was not fierce. As Calloway testified, she

“[c]ouldn’t give the job away.” (R. 60-3, Calloway Dep., at 1582.)

Plaintiff began her job at DPS on August 1, 2007. Her contract (which ran from July 1,

2007) only provided for six months of employment, with the ability for renewals with the

consent of Plaintiff, the Superintendent, and the Board. In the end, Plaintiff’s contract was

renewed twice—in December 2007 and June 2008—for a total of three six-month terms ending

on December 31, 2008. The Superintendent or the Board could terminate Plaintiff’s contract

without cause at any time. If Plaintiff was terminated without cause (as she eventually was), she

would still receive all of the compensation due to her under the terminated contract. Plaintiff

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could also be terminated with cause at the sole discretion of the Board, a route that would abolish

all of Plaintiff’s rights under the contract.

B. DPS’ Financial Straits

Almost immediately after starting as CFO, Plaintiff had to grapple with the serious

budgetary issues that afflicted DPS. Plaintiff discovered that some vendors were billing DPS for

services they did not actually perform. Plaintiff raised these instances of financial

mismanagement with the Board in August or September of 2007. Dismayed by the chaotic

financial situation in DPS, Calloway asked the Board to allow the Council of Great City Schools

to perform an audit. The Board denied Calloway’s request, but Calloway was able to obtain

funding from an outside source. The audit went forward, although Plaintiff would have to wait

until May 2008 for the results.

DPS’ fiscal year begins on July 1. The budget-writing process usually begins in February

and stretches through June, when the Board must adopt a budget. Under Michigan law, a school

district “shall not adopt or operate under a deficit budget, and . . . shall not incur an operating

deficit in a fund during a school fiscal year.” Mich. Comp. Laws § 388.1702(1). In addition, a

condition of DPS’ 2005 debt issuance meant that if the district adopted or operated under a

deficit budget, the State would appoint an emergency manager to administer the district’s

finances. These legal pressures made it even more important to balance the district’s books.

As in any budget, DPS had to balance its expenses with its income. Walter Esaw, DPS’

Executive Director of Budget, asserts that Plaintiff made missteps in both columns. One source

of unexpected expenditures was something known as the “fallout account.” As DPS prepared its

budget, it would consider whether any teachers or other employees would be laid off before the

next fiscal year. These employees were placed in a fallout account, effectively removing the cost

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of their salaries from the next year’s budget. All should go smoothly if these employees are in

fact terminated before the next fiscal year. But if they are not, the cost of their salaries will not

have been included in the annual budget. Plaintiff was on notice of the fallout account and its

pitfalls as early as August 31, 2007, when she received an e-mail from Esaw containing the

details of the fallout account and warning, “Remember there is a huge liability attached to these

fallouts if not removed.” (R. 58-5, Esaw Aff., at 1367.)

Esaw also claimed that Plaintiff mismanaged the revenue side of the DPS budget. A

large portion of DPS’ revenue depends on the number of students enrolled and attending school.

Michigan determines the number of students by totaling those in attendance on “count days.”

But according to Esaw, Plaintiff and Calloway decided to budget based on enrollment

projections. Apparently, these projections anticipated more students than actually showed up on

count days, meaning that DPS would receive less revenue from the state than budgeted for.

For her part, Plaintiff asserts that one of the major problems with the DPS budget process

was a failure to account for grant funding earmarked for special purposes. These grants can only

be spent on specific projects, but the state’s required reporting format apparently obscured the

limited utility of these funds, making it appear that DPS had a much larger revenue pool than it

in fact did.

C. Plaintiff’s Reports to the Board

Whatever the reasons, Plaintiff repeatedly told the Board (Plaintiff had been appointed

Board Treasurer in January 2008) that DPS was not operating at a deficit and would not have to

adopt a deficit budget for the fiscal year beginning July 1, 2008. But Plaintiff reversed course in

May 2008, when she received the final audit from the Council of Great City Schools. Plaintiff

announced to the public that instead of running a surplus, DPS would face a budget deficit of

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approximately $400 million. Plaintiff attributed the expected deficit to the fallout account.

Plaintiff informed the Board of the impending deficit in June 2008. Calloway testified to the

reaction that followed: Board members Joyce Hayes-Giles and Jimmy Womack “were terribly

offended. Literally yelling, slamming the doors, ‘I’m not going to have it. You are never going

to declare a deficit budget. We will fire you and you.’ Just every kind of threat there is.” (R.

60-3, Calloway Dep., at 1606.) Calloway too was unhappy with this news. On June 16, 2008,

she issued formal reprimands to both Plaintiff and Esaw for mishandling their financial

responsibilities. Calloway cited Plaintiff for failing to identify and investigate problems

surrounding the fallout account, and for not informing Calloway of the budget deficit. Calloway

also cited Esaw for failing to report budget problems to her; although Esaw disputed Calloway’s

version of events.

Plaintiff ultimately presented the Board with two budgets in June 2008. The first was a

one-year deficit budget; the other was a two-year budget that included a deficit-elimination plan.

Both options had a serious implication for DPS. As a condition of the district’s 2005 debt

offering, adopting a deficit budget would trigger the appointment of an emergency manager to

take over operations of DPS. Calloway testified that although the public responded well to

Plaintiff’s two-year deficit reduction plan, several Board members were livid: “the Board then

just yielded [to the two-year plan], but said you’ll be gone, we’ll take care of it. . . . Deficit

budget meant a trigger and there would be a state financial manager appointed. And I’m going

to get you, you’ll be gone before they get here.” (R. 60-3, Calloway Dep., at 1630–31.)

D. Plaintiff’s Final Months at DPS

Plaintiff’s relations with the Board did not improve. On July 17, 2008, Plaintiff was

testifying at a Board Finance Committee meeting. Plaintiff refused to answer questions about

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the district’s finances, stating that she needed permission from Calloway before she could speak.

Plaintiff also refused to accept a letter from the Michigan Department of Education that had been

sent to a Board member—Calloway’s procedures required such documents to reach DPS

employees through more formal channels. Board member Jimmy Womack was not happy. He

told Plaintiff that her refusal to answer questions was insubordinate, especially since she was the

Board’s Treasurer. Plaintiff responded, “Then I will be insubordinate.” (R. 58-3, Womack Dep.,

at 1353.) Womack bluntly told Plaintiff that Calloway “needed to g-o and [Plaintiff] can g-o

too.” (Id.) Womack became so animated that Board member Tyrone Winfrey, who was chairing

the meeting, had to take Womack outside and attempt to calm him down.

Plaintiff and other DPS officials at the meeting later wrote letters to Winfrey to complain

about Womack’s behavior; although Plaintiff seemed most upset that DPS employees were

exposed to criticisms of Calloway. The same day that Winfrey received these letters, he wrote a

memo to Carla Scott, the Board’s Chair, and Joyce Hayes-Giles, the Board’s Acting President,

recommending that Plaintiff be removed from her position as Board Treasurer. Winfrey justified

this recommendation by pointing to Plaintiff’s failure to apprise the Board of the impending

deficit until June 2008, and Plaintiff’s behavior at the July 17, 2008 Board meeting. The Board

removed Plaintiff as treasurer on August 14, 2008, and appointed Esaw as her temporary

replacement.

The Board also took steps to remove Plaintiff from her position as CFO. On September

24, 2008, Calloway wrote Plaintiff a letter giving notice that the Board was considering non-

renewal of her contract. The letter gave two reasons for this proposed action: reorganization

within the district and economic necessity. The letter also informed Plaintiff that she had a week

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to request a meeting with the Board to discuss the reasons for her proposed termination. Plaintiff

did not request the meeting.

As the Board had predicted, in December 2008 the State of Michigan announced that an

emergency manager would be appointed to run DPS. A week later, the Board voted 7-4 to

terminate Plaintiff without cause effective immediately.

II. PROCEDURAL HISTORY

Plaintiff began this case in March 2009 by filing suit in the U.S. District Court for the

Eastern District of Michigan. Plaintiff’s complaint stated three causes of action: First

Amendment retaliation; violation of the WPA; and a violation False Claims Act, 31 U.S.C.

§ 3730(h). After extensive discovery, Defendants moved for summary judgment on all counts.

Plaintiff opposed this motion, and then filed her own motion to amend the complaint to allege a

claim for breach of contract, based on the notice requirements for terminating certain school

employees under Mich. Comp. Laws § 380.471a. The district court granted Defendant’s motion

for summary judgment in full and denied Plaintiff’s motion for leave to amend. McCray v.

Carter, No. 09-CV-10896, 2013 WL 1316759 (E.D. Mich. Mar. 29, 2013). Plaintiff timely

appealed.

DISCUSSION

Plaintiff has appealed the district court’s grant of summary judgment as to Plaintiff’s

WPA claim, and the court’s denial of her motion for leave to amend. She has not contested the

district court’s ruling on her First Amendment and False Claim Act claims, “and thus has waived

review of them.” Moore v. Mitchell, 708 F.3d 760, 774 (6th Cir. 2013). We address each of

Plaintiff’s claims on appeal in turn.

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I. PORTIONS OF PLAINTIFF’S WPA CLAIM SHOULD HAVE SURVIVED SUMMARY JUDGMENT

“The [Michigan] Legislature enacted the WPA in 1980 to provide protection to

employees who report a violation or suspected violation of state, local, or federal law.” Henry v.

Laborers’ Local 1191, --- N.W.2d ----, 495 Mich. 260, at *9 (2014) (quotation marks omitted).

“The WPA furthers this objective by removing barriers that may interfere with employee efforts

to report those violations or suspected violations, thus establishing a cause of action for an

employee who has suffered an adverse employment action for reporting or being about to report

a violation or suspected violation of the law.” Whitman v. City of Burton, 831 N.W.2d 223, 229

(Mich. 2013) (footnote omitted). Specifically, the WPA, as relevant to this case, prohibits an

employer from “discharg[ing], threaten[ing], or otherwise discriminat[ing] against an employee .

. . because the employee . . . reports or is about to report . . . a violation or a suspected violation

of a law . . . to a public body.” Mich. Comp. Laws § 15.362.

As in cases involving federal anti-retaliation statutes, a plaintiff may prove a violation of

the WPA using either direct or circumstantial evidence of retaliation. See Shaw v. Ecorse, 770

N.W.2d 31, 40 (Mich. Ct. App. 2009) (per curiam). Under the circumstantial route, a plaintiff

opposing summary judgment must first establish a prima facie case “by showing that (1) the

plaintiff was engaged in protected activity as defined by the act, (2) the defendant took an

adverse employment action against the plaintiff, and (3) a causal connection exists between the

protected activity and the adverse employment action.” Debano-Griffin v. Lake County, 828

N.W.2d 634, 638 (Mich. 2013) (quotation marks omitted). A defendant may then proffer

evidence that the adverse employment action was motivated by legitimate reasons, after which a

plaintiff must “raise a triable issue that the employer’s proffered reason was . . . a pretext for

unlawful retaliation.” Id. at 639 (quotation marks and alteration omitted). If a plaintiff goes the

direct route, she must introduce evidence “which, if believed, requires the conclusion that the

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plaintiff’s protected activity was at least a motivating factor in the employer’s actions.” Shaw,

770 N.W.2d at 40.

A. Direct Evidence

Plaintiff asserts that she has offered direct evidence that her reports of financial shortfalls

in June 2008 were a motivating factor of adverse employment actions taken against her. We

agree.

First, Plaintiff engaged in protected activity when she reported to the Board in June 2008

that DPS had been operating in the red and would need to adopt a deficit budget for the 2008–

2009 fiscal year. The Board is a “public body,” as defined by the WPA. See Mich. Comp. Laws

§ 15.361(d)(iii). And in June 2008, Plaintiff reported a violation of state law to the Board.

Under Michigan law, DPS “shall not adopt or operate under a deficit budget, and a district or

intermediate district shall not incur an operating deficit in a fund during a school fiscal year.”

Mich. Comp. Laws § 388.1702(1). At the time Plaintiff made her reports to the Board, DPS had

obviously not yet adopted a deficit budget. But, reading the facts in Plaintiff’s favor, the deficit

budget became a necessity because DPS had already been illegally operating at a deficit.

Next, Plaintiff has proffered evidence directly tying this protected activity to adverse

actions. Calloway testified that when Plaintiff reported these financial problems, two Board

members “were terribly offended. Literally yelling, slamming the doors, ‘I’m not going to have

it. You are never going to declare a deficit budget. We will fire you and you.’ Just every kind

of threat there is.” (R. 60-3, Calloway Dep., at 1606.) These words were an explicit threat to

Plaintiff’s employment. They were made by “agent[s] of [Plaintiff’s] employer,” who

themselves count as “employers” under the WPA. Mich. Comp. Laws § 15.361(b). Such threats

from such sources, standing alone, violate the WPA. See Phinney v. Perlmutter, 564 N.W.2d

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532, 555 (Mich. Ct. App. 1997), overruled on other grounds by Garg v. Macomb County Cmty.

Mental Health Servs., 696 N.W.2d 646 (Mich. 2005).

This evidence also supports Plaintiff’s claim that her termination violated the WPA. The

Board members who threatened Plaintiff when she informed them of DPS’ financial difficulties

later followed through and voted to terminate Plaintiff. If the Board had not voted to terminate

Plaintiff, the record suggests that her contract would simply have been renewed. Calloway had

recommended that Plaintiff’s contract be extended and the State Department of Education had

dubbed Plaintiff DPS’ “key leader” and “nearly indispensable to [DPS’] long range effort.” (R.

60-12, Radke Ltr., at p.4.) Yet the Board voted 7-4 to terminate Plaintiff without cause. If the

two Board members who threatened to fire Plaintiff had voted the other way, Plaintiff would not

have been fired, with the motion failing by a vote of 5-6.

Defendants suggest—without citing any Michigan or federal authority—that Plaintiff had

to prove that a majority of the Board was motivated by retaliatory animus. We do not believe

that Michigan courts would require this showing. A plaintiff can prevail on a WPA claim if she

can show that “protected activity was a ‘motivating factor’ for the employer’s adverse action.”

Debano-Griffin, 828 N.W.2d at 639 (emphasis added). Plaintiff does not need to prove but-for

causation.1 Furthermore, in the analogous context of a First Amendment retaliation claim, our

Circuit has held that “where improperly motivated [board] members supply the deciding margin

1
The U.S. Supreme Court has recently clarified that a plaintiff must prove but-for
causation to prevail in ADEA claims and Title VII retaliation claims. See Univ. of Tex. Sw. Med.
Ctr. v. Nassar, 133 S. Ct. 2517, 2533 (2013); Gross v. FBL Fin. Servs., Inc., 557 U.S. 167, 177–
78 (2009). Both of these statutes proscribe retaliating against someone “because” of that
person’s protected activity. 29 U.S.C. § 623(a) (ADEA); 42 U.S.C. § 2000e-3(a) (Title VII).
Although the WPA contains the same “because” language, Mich. Comp. Laws § 15.362, we
doubt that Michigan courts would upset this settled issue of state law based on the Supreme
Court’s pronouncements on two federal statutes. Indeed, Michigan courts have already rejected
but-for causation in WPA claims for failure to promote. See Hopkins v. City of Midland, 404
N.W.2d 744, 752 (Mich. Ct. App. 1987).

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[in a vote], the board itself is liable.” Scarbrough v. Morgan County Bd. of Educ., 470 F.3d 250,

262 (6th Cir. 2006). The record shows that the two Board members who threatened to fire

Plaintiff immediately after she reported a financial crisis in DPS later provided decisive votes to

terminate her. This is sufficient for Plaintiff to survive summary judgment.

Finally, Defendants argue that Plaintiff was fired for an entirely valid reason—gross

incompetence. But even if Defendants were motivated by this valid justification (and there is

certainly support in the record for this position), Plaintiff is still entitled to go forward if she can

“prove that the defendant’s discriminatory animus was more likely than not a ‘substantial’ or

‘motivating’ factor in the decision.” Sniecinski v. Blue Cross & Blue Shield of Mich., 666

N.W.2d 186, 193 (Mich. 2003); see also Shaw, 770 N.W.2d at 40. Plaintiff has introduced

evidence that two Board members explicitly threatened to fire Plaintiff immediately after she

reported violations of Michigan law in June 2008. Those two Board members later cast decisive

votes to terminate Plaintiff’s employment with DPS. This evidence is enough for Plaintiff’s

claim to survive summary judgment.

B. Circumstantial Evidence

Although we reverse the district court as to Plaintiff’s claim based on her reports in June

2008, we affirm the district court’s holding that Plaintiff has not established a prima facie case of

retaliation based on the reports of financial mismanagement that she made to the Board in

August and September of 2007. To establish the causation element of her prima facie claim,

Plaintiff must “show that h[er] employer took adverse employment action because of [her]

protected activity,” not simply that she was terminated “after the protected activity occurred.”

West v. Gen. Motors Corp., 665 N.W.2d 468, 472 (Mich. 2003) (per curiam). The year that

passed between Plaintiff’s protected activity and her termination is too long to support a causal

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inference, and Plaintiff has not proffered evidence to bolster this element. We thus hold that the

district court properly dismissed Plaintiff’s WPA claim stemming from Plaintiff’s reports in

August and September 2007.

II. THE DENIAL OF PLAINTIFF’S MOTION FOR LEAVE TO AMEND WAS NOT AN ABUSE OF
DISCRETION

Plaintiff next asserts that the district court erred when it denied her motion for leave to

amend her complaint. We disagree.

A party may amend her complaint at any time before trial with the court’s permission,

and “[t]he court should freely give leave when justice so requires.” Fed. R. Civ. P. 15(a)(2). But

the court may deny leave to amend based on “undue delay, bad faith or dilatory motive on the

part of the movant, . . . undue prejudice to the opposing party by virtue of allowance of the

amendment, [or] futility,” among other reasons. Foman v. Davis, 371 U.S. 178, 182 (1962). We

have “required at least some significant showing of prejudice to deny a motion to amend based

solely upon delay.” Prater v. Ohio Educ. Ass’n, 505 F.3d 437, 445 (6th Cir. 2007) (quotation

marks omitted). When the district court denies a motion for a reason other than futility, we

review that decision for abuse of discretion. See Crestwood Farm Bloodstock v. Everest Stables,

Inc., 751 F.3d 434, 444 (6th Cir. 2014).

On May 16, 2011, more than two years after she initiated this lawsuit, Plaintiff sought to

amend her complaint to allege a claim to breach of contract. Plaintiff did not assert that

Defendants violated any term explicitly included in her employment contract, but rather that they

violated a provision of Michigan law governing notice of non-renewal of DPS administrators’

contracts. See Mich. Comp. Laws § 380.471a. Section 380.471a actually requires the Board to

give administrators two notices. First, the Board must give the administrator “a written

statement of the reasons the board is considering the nonrenewal” at least 30 days before the

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Board issues the final notice of nonrenewal. Mich. Comp. Laws § 380.471a(3). Once the

administrator receives this first notice, she can request a meeting with the Board to discuss the

reasons for the proposed non-renewal. See id. Second, the Board must give the administrator a

separate notice of non-renewal “at least 60 days before the termination date of the contract.”

Mich. Comp. Laws § 380.471a(2). If the Board does not follow these procedures, “the contract

is renewed for an additional 1-year period.” Id. Although Plaintiff concedes that she received a

notice of non-renewal in September 2008, she asserts that this single notice cannot satisfy both

requirements of § 380.471a.

The district court rejected Plaintiff’s proposed amendment, holding that Plaintiff’s

motion was both untimely and would cause Defendants prejudice, as it came after the close of

discovery. See McCray, 2013 WL 1316759, at *18. This was not an abuse of discretion. At the

moment Plaintiff was terminated, she knew (at least presumptively) the notice requirements of

§ 380.471a, and she knew what notices she had or had not received from the Board.

Nonetheless, Plaintiff did not include this claim in her original complaint, and waited for more

than two-and-a-half years before moving to amend. By that date, discovery had long since

closed and motions for summary judgment were pending. The district court acted well within its

discretion in denying Plaintiff’s motion under these circumstances. See Duggins v. Steak ‘N

Shake, Inc., 195 F.3d 828, 834 (6th Cir. 1999).

CONCLUSION

For the reasons explained above, we REVERSE the district court’s grant of summary

judgment as to Plaintiff’s WPA claim stemming from her reports to the Board in June 2008,

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AFFIRM the district court in all other respects, and REMAND for further proceedings

consistent with this opinion.2

2
We add one final observation. This case is in federal court on the basis of federal
question jurisdiction, with supplemental jurisdiction covering Plaintiff’s WPA claim. See
28 U.S.C. § 1367. Plaintiff, however, has not appealed the dismissal of her federal claims, and
those causes of actions will not go forward on remand. The district court continues to have
supplemental jurisdiction over Plaintiff’s WPA claim, see Musson Theatrical, Inc. v. Fed. Exp.
Corp., 89 F.3d 1244, 1255 (6th Cir. 1996), but this state law claim entirely dominates the case at
this point in proceedings. See 28 U.S.C. § 1367(c)(2), (3). The district court may wish to
consider whether the courts of the State of Michigan are the more appropriate forum for this
dispute, which involves significant issues of fact and law for the State and the City of Detroit.
However, this choice lies entirely within the sound discretion of the district court.

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