United States Court of Appeals
Fifth Circuit
F I L E D
UNITED STATES COURT OF APPEALS
For the Fifth Circuit June 29, 2005
Charles R. Fulbruge III
Clerk
No. 04-60155
BAYLESS (“BO”) ODELL WHEELER
and DANIEL L. MOORE,
Plaintiffs-Appellants,
VERSUS
BL DEVELOPMENT CORPORATION, D/B/A GRAND CASINO, TUNICA,
Defendant-Appellee.
Appeal from the United States District Court
For the Northern District of Mississippi
Before DAVIS, SMITH, and DeMOSS, Circuit Judges.
DeMOSS, Circuit Judge:
Appellants Bayless “Bo” Wheeler and Daniel L. Moore
(collectively, “Appellants”) filed suit against BL Development
Corporation, d/b/a Grand Casino Tunica (“Grand Casino”), asserting
that they were wrongfully terminated from their employment for
having reported potentially illegal activity on the part of Grand
Casino or, alternatively, on account of their race in contravention
of 42 U.S.C. § 1981. Grand Casino moved for summary judgment,
which was granted by the district court. Appellants timely filed
the instant appeal.
BACKGROUND AND PROCEDURAL HISTORY
Moore first began his employment with Grand Casino in June
2000, when he was hired as Director of Transportation. Wheeler was
hired soon thereafter as a transportation manager in August 2000.
In late September 2001, Jimmy Buckhalter of Grand Casino’s
regulatory affairs department received information from an employee
in the transportation department that a “tire changing” machine,
i.e., a machine used to replace tires on metal wheel rims, had been
“loaned” to Country Ford, a Ford dealership in Southaven,
Mississippi, located approximately 20 miles northwest of Grand
Casino. Buckhalter thereafter notified Karen Sock, Grand Casino’s
General Manager, of the information and requested that he be
permitted to conduct an investigation into the matter. Buckhalter
received authorization to proceed and his investigation began
shortly thereafter in October 2001.
Buckhalter soon learned that Moore’s son, Terry Moore, worked
at Country Ford as a warranty agent and second in charge of the
auto shop. Buckhalter inquired of Wheeler, as a transportation
manager, how the tire changing machine made its way into the hands
of Country Ford. Wheeler allegedly provided differing accounts of
how the equipment was loaned to Country Ford.1 Buckhalter
1
Wheeler first admitted loaning the tire changing machine to
Country Ford without authorization and without filling out any
paperwork memorializing the loan. He subsequently stated that the
equipment was broken and that he had reached an arrangement with
2
subsequently obtained the assistance of Daniel Moore, the Director
of Transportation, to reconcile Wheeler’s varying accounts and to
contact his son Terry at Country Ford to uncover whether Terry had
any additional information regarding the unauthorized loan. After
several meetings between Buckhalter’s investigative team and
Appellants, it was determined that both Moore and Wheeler were to
be suspended. Seven days later, Sock decided to terminate each of
Moore’s and Wheeler’s employment with Grand Casino for “violation
of company policy.”
Meanwhile, at about the same time in October 2001, Grand
Casino announced a new Executive Dry Cleaning Plan (the “Plan”),
which offered Grand Casino executives up to $120 per month of free
dry cleaning services.2 Believing the arrangement between the dry
cleaner and Grand Casino to be an illegal kickback, Appellants
allegedly reported the Plan to Buckhalter prior to his
investigation into the loaning of the tire changing machine.
Appellants readily admit that after initially being suspended by
Grand Casino, but before they were terminated, they also sent a
Country Ford whereby Wheeler would loan the machine to Country Ford
if they could, in return, fix it. It was discovered, however, that
Wheeler could not identify what part of the machine was broken nor
did the Country Ford representative with whom Wheeler allegedly
made the arrangement have any knowledge of needing to repair the
machine. In fact, the Country Ford representative revealed that
the dealership did not have the capability to fix a tire changing
machine.
2
The arrangement between the dry cleaner and Grand Casino was
subsequently amended to offer executives 50% off all dry cleaning
instead of the $120 in free monthly services.
3
memo to the Mississippi Gaming Commission detailing how they
perceived the Plan to constitute illegal activity. The Gaming
Commission conducted an investigation and ultimately concluded that
the Plan was not criminally illegal.
Upon being terminated, Appellants filed suit against Grand
Casino, alleging that their termination was the result of their
reporting to Buckhalter their belief that the Plan was illegal, and
therefore was in violation of a public policy-based exception to
Mississippi’s employment at will doctrine. Alternatively,
Appellants maintained that their termination by black casino
executives occurred because Appellants are white, in violation of
42 U.S.C. § 1981. Grand Casino moved for summary judgment, arguing
that there existed no genuine issue of fact under which Appellants
could recover for either claim.
The district court granted Grand Casino’s motion, concluding
that the relevant exception to the employment at will doctrine
provides Appellants protection from subsequent termination only if
the activity reported was “criminal,” not merely illegal. Having
found that the reported activity was neither criminal nor illegal,
the district court concluded that Appellants were precluded from
recovering under that claim. In addition, the district court found
that Appellants had not come forward with evidence establishing a
prima facie case of racial discrimination, most notably proof that
Grand Casino replaced Appellants with employees outside Appellants’
protected class. Appellants timely filed the instant appeal.
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STANDARD OF REVIEW
This Court reviews grants of summary judgment de novo,
applying the same standard as the district court. Tango Transp. v.
Healthcare Fin. Servs. LLC, 322 F.3d 888, 890 (5th Cir. 2003).
Summary judgment is appropriate if no genuine issue of material
fact exists and the moving party is entitled to judgment as a
matter of law. FED. R. CIV. P. 56(c). The Court views the evidence
in the light most favorable to the non-movant. Coleman v. Houston
Indep. Sch. Dist., 113 F.3d 528, 533 (5th Cir. 1997). The non-
movant must go beyond the pleadings and come forward with specific
facts indicating a genuine issue for trial to avoid summary
judgment. Celotex Corp. v. Catrett, 477 U.S. 317, 324 (1986). A
genuine issue of material fact exists when the evidence is such
that a reasonable jury could return a verdict for the non-movant.
Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986). Summary
judgment is appropriate, however, if the non-movant “fails to make
a showing sufficient to establish the existence of an element
essential to that party’s case.” Celotex, 477 U.S. at 322.
DISCUSSION
On appeal, Appellants maintain the district court erred on two
grounds when it granted summary judgment in favor of Grand Casino.
First, Appellants argue the district court misapplied Mississippi
law in denying them relief for reporting what they believed to be
illegal activity. Second, Appellants contend the district court
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erroneously concluded that they did not provide sufficient evidence
establishing a prima facie case of racial discrimination.
In response, Grand Casino argues the district court correctly
determined that the activity reported by Appellants did not
actually constitute a crime and therefore summary judgment was
appropriate under Mississippi law. Moreover, Grand Casino
maintains the only competent evidence of racial discrimination
offered by Appellants is irrelevant because the black employee
allegedly subjected to disparate treatment was not a “similarly
situated” employee under “nearly identical” circumstances.
I. Whether the exception to Mississippi’s employment at will
doctrine requires the conduct reported to actually be criminal
in nature.
Mississippi has adhered to the employment at will doctrine
since 1858. Perry v. Sears, Roebuck & Co., 508 So. 2d 1086, 1088
(Miss. 1987). Under this common law rule, the employment contract
between employer and employee may be terminated by either party
with or without justification. HeartSouth, PLLC v. Boyd, 865 So.
2d 1095, 1108 (Miss. 2003) (citation omitted). In McArn v. Allied
Bruce-Terminix Co., Inc., 626 So. 2d 603 (Miss. 1993), the
Mississippi Supreme Court carved out a public policy exception to
this general rule. In McArn, the employee worked for a pest
control service company. Id. at 604. McArn was ultimately
terminated and claimed that he was wrongfully discharged because he
had reported to customers and a state agency that the work being
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performed by his former employer was inadequate or, in some cases,
non-existent. Id. at 605-06. In seeking to have the Mississippi
Supreme Court create a narrow public policy exception to the common
law rule, McArn asserted that he was simply reporting conduct that
was criminal under Mississippi law. Id. at 606 (citing MISS. CODE
ANN. §§ 97-19-39 and 69-23-19 (1972) (denoting as a felony the
receipt of money under false pretense and as a misdemeanor the
violation of state pest control regulations)). The Mississippi
Supreme Court agreed with McArn, concluding that “an employee who
is discharged for reporting illegal acts of his employer to the
employer or anyone else is not barred by the employment at will
doctrine from bringing action in tort for damages against his
employer.” Id. at 607 (determining that the exception applies even
where there is a “‘privately made law’ governing the employment
relationship”).
Appellants maintain that although the activity they reported
involving the Plan was ultimately neither illegal nor criminal,
McArn simply requires that they reasonably believed the activity to
be criminally illegal. Appellants rely on the Mississippi Supreme
Court’s decision in Willard v. Paracelsus Health Care Corp., 681
So. 2d 539 (Miss. 1996) (“Willard I”), in support of their
position. In Willard I, two hospital workers were terminated after
reporting to their superiors that the hospital administrator was
receiving checks personally made out to her in alleged violation of
hospital policy. Id. at 540. After a jury trial, judgment was
7
entered upon jury verdicts in favor of the former hospital
employees. Id. The employees appealed, however, arguing that they
were entitled to a jury instruction on retaliatory discharge and,
if found by the jury, consideration of an award for punitive
damages. Id. at 540-41. The Mississippi Supreme Court ruled the
trial court erred by not giving such an instruction and remanded
the case to consider whether the hospital committed the independent
tort of retaliatory discharge and, if so, to consider whether
punitive damages were recoverable. Id. at 543.
Appellants specifically rely on the court’s statement that
“[d]ischarge in retaliation for an employee’s good faith effort to
protect the employer from wrongdoing constitutes an independent
tort and may support punitive damages.” Id. (emphasis added).
Appellants argue this statement can be interpreted as not requiring
a plaintiff to prove that the alleged illegal act reported is
actually illegal, only that he had a good faith belief of the same.
Appellants’ argument is unpersuasive. As an initial matter,
the issue in Willard I was not whether the reported activity was
reasonably believed to be illegal. Rather, the activity at issue
in Willard I involved a cut-and-dried case of forgery. The court
did not engage in any discussion of whether the conduct reported
was criminally illegal.3 Therefore, Appellants’ attempt to equate
3
In fact, by its own terms, the only issue the Mississippi
Supreme Court was addressing was whether an employee’s reporting of
illegal activity is an independent tort giving rise to punitive
damages – a question expressly left unanswered in McArn. Willard
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an employee’s “good faith effort” in reporting illegal activity,
which is protected under the common law exception, with a good
faith belief that illegal activity is taking place is misplaced.
Appellants further rely on a subsequent Mississippi Supreme
Court ruling, Paracelsus Health Care Corp. v. Willard, 754 So. 2d
437 (Miss. 2000) (“Willard II”), in which the court again addressed
the scope of its previous decision in McArn. Appellants
specifically cite the court’s statement that “neither McArn or
Willard I . . . suggest that the plaintiff must first prove that a
crime was committed” for the proposition that a plaintiff merely
needs to have a good faith belief that the reported conduct is
illegal to benefit from the public policy exception. Id. at 443.
Again, Appellants’ argument is unpersuasive. In Drake v.
Advance Construction Service, Inc., 117 F.3d 203 (5th Cir. 1997),
this Court explored the boundaries of McArn’s public policy
exception. The employee in Drake was retained as a quality control
manager of a construction site. Id. at 203. After reporting to his
superiors certain deficiencies in the way the job was being
completed, he was ordered not to include such deficiencies in his
formal reports to the Army Corps of Engineers (the “Corps”). Id.
at 204. The employee decided otherwise and included the observed
deficiencies in the quality control reports he submitted to the
Corps. Id. at 203-04. After being terminated shortly thereafter,
I, 681 So. 2d at 543; see also McArn, 626 So. 2d at 608.
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the employee filed suit against his employer, alleging that he was
wrongfully discharged under the McArn public policy exception for
refusing to commit an illegal act. Id. at 204. The district court
granted summary judgment in favor of the employer, finding that the
“[d]eliberate failure to note a deficiency in the placement of
[rock], while perhaps unprofessional or immoral, is not an illegal
act.” Id. On appeal, this Court discussed whether the submitting
of those particular false reports was violative of 18 U.S.C. §
1001. Concluding that a genuine issue of material fact existed as
to whether such reporting would have constituted an illegal
activity, this Court reversed and remanded the case to the district
court. Id. at 205-06.
Importantly, the Drake Court did not conclude that the
employee was protected under McArn simply because he reasonably
believed what he was asked to do by his superiors was criminal.
Instead, remand was ordered to determine the legality of such
action, lending credence to Grand Casino’s position that the act
itself must be criminal to implicate the exception and rendering
the subjective intent or belief of the plaintiff irrelevant.
Clearly, as the parties concede in the instant case, the Plan did
not constitute any form of criminally illegal activity; therefore,
McArn’s “narrow public policy exception” is not applicable in this
instance. To assist Appellants in broadening the scope of what the
Mississippi Supreme Court and this Court have continually
recognized as a “narrow public policy exception,” see Drake, 117
10
F.3d at 204; Boyd, 865 So. 2d at 1108, would serve to envelope a
much wider class of activities – a broadening that is at odds with
the intent of the Mississippi Supreme Court when it first created
the exception.4
In sum, the district court did not err when it determined that
Appellants are precluded from recovering under the public policy
exception because they have failed to come forth with evidence
establishing that the Plan itself constituted criminal activity.
II. Whether there was sufficient evidence supporting Appellants’
4
This Court has also considered whether the violation of a
federal regulation (OSHA) was tantamount to criminally illegal
activity under the state criminal code, and thus subject to the
McArn exception. Howell v. Operations Mgmt. Int’l, Inc., No. 03-
60238, 2003 WL 22303057 (5th Cir. Oct. 8, 2003) (unpublished
opinion). Specifically, the Howell court ruled:
Although Mississippi law generally permits employers
to terminate their at-will employees for any reason, the
Mississippi Supreme Court created a “narrow public policy
exception” to that rule in McArn v. Allied Bruce-Terminix
Co. Inc., 626 So. 2d 603, 607 (1993). The exception
creates a tort action in favor of an at-will employee who
is discharged for “refus[ing] to participate in an
illegal act” or for “reporting illegal acts of his
employer.” Id. McArn itself involved a criminal act, and
the Mississippi Supreme Court’s statement of the issue on
appeal was phrased in terms of “participat[ion] in
criminal activity.” Id. at 604, 606. Howell did not
assert before the district court that his OSHA
complaints, had they found been found meritorious, would
have amounted to reports of criminal acts. Howell has not
shown us, and we have not found, any Mississippi cases
indicating that the McArn exception applies to regulatory
violations of the sort involved in Howell's OSHA
complaints. Our own court’s prior cases involving the
McArn exception have involved criminal illegality.
Id. at *3 (emphases added and footnotes omitted). Again, this
Court focused on the criminal illegality of the act itself, without
regard to what the plaintiff reasonably believed to be illegal.
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race discrimination claims.
In its Memorandum Opinion, the district court found that
Appellants’ summary judgment evidence failed to establish a prima
facie case of racial discrimination. On appeal, Appellants
maintain they produced sufficient evidence of discrimination,
including evidence that they were replaced by someone of a
different race and that they were treated less favorably than a
similarly situated person of a different race.
Under the burden-shifting framework established in McDonnell
Douglas Corp. v. Green, 411 U.S. 792 (1973), the plaintiff may
establish a prima facie case of discrimination using circumstantial
evidence. Laxton v. Gap Inc., 333 F.3d 572, 578 (5th Cir. 2003).
To establish a prima facie case of discrimination under § 1981,
Appellants must establish that they: (1) are members of a protected
group; (2) were qualified for the position held; (3) were
discharged from the position; and (4) were replaced by persons
outside of the protected group. Singh v. Shoney’s, Inc., 64 F.3d
217, 219 (5th Cir. 1995). The burden then shifts to the employer
to demonstrate a legitimate, non-discriminatory reason for the
termination. Laxton, 333 F.3d at 578. If the employer is
successful in producing such a reason, the presumption of
discrimination dissipates, leaving the plaintiff with the ultimate
burden of establishing, by a preponderance of the evidence, that
the employer discriminated against the employee because of the
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employee’s protected status. Id.
The district court concluded that summary judgment was proper
as to Appellants’ § 1981 claims because Appellants were unable to
satisfy the fourth element of the four-prong test, i.e., that they
were replaced by a person outside the protected group.5 This Court
has recognized that a plaintiff may make this showing by
demonstrating either that he was replaced by someone outside the
protected class or that other similarly situated employees outside
the protected class were treated more favorably. Okoye v. Univ. of
Tex. Houston Health Sci. Ctr., 245 F.3d 507, 512-13 (5th Cir.
2001).
Appellants maintain they established the fourth prong by
presenting evidence that Richard Simms, a black male and the former
Vice President of Resorts, assumed their duties. In addition, as
evidence that they were treated differently than other similarly
situated employees, Appellants argue Grand Casino did not take
disciplinary action against Debra Byrd, a black female manager, who
was found to have hidden Grand Casino property from auditors.
With regard to Appellants’ first contention, the district
court found that shortly after Appellants were terminated, Grand
5
The district court also found that, even assuming Appellants
did come forth with evidence establishing a prima facie case of
discrimination, they nevertheless failed to rebut Grand Casino’s
legitimate and non-discriminatory reason for discharging them.
Clearly, under McDonnell Douglas, we need not reach this second
issue if we conclude Appellants did not first establish a prima
facie case of discrimination. See Byers v. Dallas Morning News,
Inc., 209 F.3d 419, 427 (5th Cir. 2000).
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Casino engaged in a departmental restructuring. As a result of
this restructuring, Simms assumed the position of Vice President of
Security — a position neither Moore nor Wheeler previously held.
Moreover, there is record evidence establishing that Appellants’
previous positions were formally assumed by white males after the
restructuring. Specifically, Moore’s position as “Director of
Transportation” was filled by Chris Tatum as the “Director of
Resort Operations,” and Leroy Harrison assumed the position of
“Transportation Manager,” the position formerly held by Wheeler.
Both Tatum and Harrison are white. Based on these facts, the
district court properly concluded that Appellants were not replaced
with persons outside the protected class.
As for Appellants’ second argument regarding dissimilar
treatment for similarly situated employees, the district court
determined that Byrd, a black Grand Casino manager, was ultimately
not terminated because she was truthful in her statements during
the course of the investigation into her actions. Conversely, the
district court found it relevant that Wheeler was discharged for
making repeated, untruthful statements during the company’s
investigation into his unauthorized loaning out of equipment.
To establish disparate treatment, a plaintiff must demonstrate
that a “similarly situated” employee under “nearly identical”
circumstances, was treated differently. Mayberry v. Vought
Aircraft Co., 55 F.3d 1086, 1090 (5th Cir. 1995). Appellants argue
that Wheeler, Moore, and Byrd all had the same supervisor; Moore
14
and Byrd were both directors; and all three were accused of
removing company assets at relatively the same time. Appellants
offer as further proof of their employment discrimination claim the
fact that the decision makers responsible for terminating
Appellants are all black (Karen Sock, Richard Simms, and Jimmy
Buckhalter).
In response, Grand Casino notes that Byrd was found to have
hidden two boxes of shampoo and hair coloring in her car, the value
of which is “dramatically less” than that of a several thousand
dollar tire changing machine.6 Moreover, Grand Casino observes
that Byrd readily admitted her conduct during the investigation,
whereas Appellants were found to have been less than truthful
throughout the investigation into their activities. Grand Casino
also argues that the record evidence reflects the fact that white
males other than Appellants, who had been found to have removed
company assets without permission, received disciplinary actions
short of termination.
In sum, Appellants have not come forward with sufficient
evidence establishing that their termination was racially
motivated. Appellants have not established that they were replaced
by non-white employees nor have they demonstrated that their
6
Grand Casino maintains the difference in the value and nature
of the property allegedly removed by Appellants and Byrd
necessarily requires a finding that the circumstances in each case
are not “nearly identical” for purposes of this panel’s disparate
treatment inquiry.
15
discharge was the result of being treated any differently than
other non-white similarly situated employees.
CONCLUSION
Having carefully reviewed the entire record of this case, and
having fully considered the parties’ respective briefing and
arguments, we conclude the district court properly granted summary
judgment in favor of Grand Casino because Appellants failed to come
forward with evidence establishing: (1) the Plan adopted by Grand
Casino constituted criminally illegal activity; or (2) a prima
facie case of racial discrimination. Accordingly, the district
court’s granting of summary judgment is AFFIRMED.
AFFIRMED.
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