F I L E D
United States Court of Appeals
Tenth Circuit
PUBLISH
NOV 21 2000
UNITED STATES COURT OF APPEALS
PATRICK FISHER
Clerk
TENTH CIRCUIT
EDWARD TYLER,
Plaintiff-Appellee,
v. No. 99-1421
RE/MAX MOUNTAIN STATES,
INC.,
Defendant-Appellant.
Appeal from the United States District Court
for the District of Colorado
(D.C. No. 96-WY-734-AJ)
Todd J. McNamara (Kristina James with him on the brief) of Todd J. McNamara,
P.C., Denver, Colorado, for Plaintiff-Appellee.
Andrew M. Low (Thomas P. Johnson and Victoria V. Johnson with him on the
briefs) of Davis, Graham & Stubbs LLP, Denver, Colorado, for Defendant-
Appellant.
Before BRORBY, McWILLIAMS and KELLY, Circuit Judges.
BRORBY, Circuit Judge.
This case requires us to review the trial court’s denial of defendant’s
motion for judgment as a matter of law, pursuant to Federal Rule of Civil
Procedure 50(b), after an adverse jury verdict. The jury found RE/MAX
intentionally discriminated against Mr. Tyler on the basis of race by denying his
franchise application, in violation of 42 U.S.C. § 1981 and the Federal Housing
Act, 42 U.S.C. § 3601. This court has jurisdiction pursuant to 28 U.S.C. § 1291.
We affirm. 1
FACTUAL BACKGROUND
Mr. Tyler is an African American real estate agent and broker. Since 1991,
he has owned and operated his own real estate practice (“Cheyenne Springs
Realty”) south of Colorado Springs. At all times relevant to this appeal, his real
estate practice included a furnished office, office equipment, one or more licensed
sales agents, and an administrative assistant.
The chain of events leading up to this litigation began in 1992, at a
Colorado Association of Realtors convention, when a RE/MAX representative
informed Mr. Tyler the normal franchise fee was reduced to $10,000 in an effort
to increase the company’s market share. In 1993, Mr. Tyler became interested in
1
We grant RE/MAX’s unopposed motion to file its supplemental appendix.
-2-
securing a RE/MAX franchise in the same area as his current real estate practice.
In September of that year, he completed and submitted to RE/MAX his personal
history form, income statement, and statement of financial condition. The
personal history form sought information on each applicant’s educational and
business background, the number of sales associates employed, and the number of
listings and sales closed in the last year. Mr. Tyler’s income statement showed a
net profit (income minus expenses) equaling $62,858.81. His statement of
financial condition listed his business, personal, and total net worth. The final
column calculated the “owner’s [total] net worth” as $194,372.26.
After submitting these documents, Mr. Tyler contacted Ms. Bond, the
Regional Director of RE/MAX Mountain States, to set an appointment to discuss
his franchise application. During his visit to the corporate offices, he informed
Ms. Bond of two IRS tax liens filed against him, but, he explained, the liens had
been paid. Mr. Tyler testified at trial that he forwarded the tax lien releases to
her in November.
In the spring of 1994, Mr. Tyler compiled a lengthy document for a Small
Business Association loan titled “RE/MAX Franchise, Preliminary Purchase
Proposal, Phase I” (“Phase I Proposal”). The Phase I Proposal detailed his
-3-
operating plan, financial statements, and sales and census information for his
current practice and prospective franchise. In his operating plan, Mr. Tyler
graphed his 1992 residential sales in excess of $3.1 million, and his commercial
sales at $95,000, with a total of $142,626 in commission. In 1993, his residential
sales increased to over $3.5 million, while his commercial sales rose to $770,000,
with $170,062 in commission. Most notable for this litigation, the Phase I
Proposal included financial statements for the 1993 calendar year. The balance
sheet for Cheyenne Springs Realty listed the business’ “net worth” as negative
$10,419.95. The actual “income and expense” statement showed a loss of
$5,932.45.
In April 1994, Ms. Bond visited Mr. Tyler’s Cheyenne Springs Realty
office. Mr. Tyler testified at trial that during her visit, Ms. Bond did not ask
about the releases on his tax liens, the number of agents on staff, the number of
sales he had in the first quarter of 1994, or suggest there were any abnormalities
in his business financial statements. The two did not speak to each other again
until May.
In early May 1994, Ms. Bond telephoned Mr. Tyler to inform him his
franchise application was denied. He requested her reasons for the rejection.
-4-
Days after the telephone call, he sent Ms. Bond a letter which listed the four
reasons she had allegedly given, refuted each in detail, and requested
reconsideration of his application. More than two months later, Ms. Bond penned
her own letter articulating seven reasons for the rejection.
Mr. Tyler sued RE/MAX for intentional racial discrimination, in violation
of 42 U.S.C. § 1981 and 42 U.S.C. § 3601. The trial court denied RE/MAX’s
motion for summary judgment, and the case proceeded to trial. (App. Vol. I at 6.)
RE/MAX raised its motion for judgment as a matter of law at the close of the
plaintiff’s case and again at the close of all the evidence. The jury found in favor
of Mr. Tyler, and awarded him damages. 2 RE/MAX renewed its motion for
judgment as a matter of law or in the alternative a new trial, after the entry of
judgment; the trial court denied the motion.
STANDARD OF REVIEW
We review the district court’s denial of a Rule 50(b) motion for judgment
as a matter of law de novo, applying the same legal standard as the district court.
Baty v. Willamette Indus., Inc., 172 F.3d 1232,1241 (10th Cir. 1999). We shall
2
RE/MAX does not appeal the jury verdict finding a violation of 42 U.S.C.
§ 3601.
-5-
review all the evidence in the record, construe the evidence and inferences most
favorably to the nonmoving party, and refrain from making credibility
determinations and weighing evidence. Reeves v. Sanderson Plumbing Prod.,
Inc., 120 S. Ct. 2097, 2110 (2000); see also Deters v. Equifax Credit Info. Servs.,
Inc., 202 F.3d 1262, 1268 (10th Cir. 2000). Judgment as a matter of law is
appropriate “only if the evidence points but one way and is susceptible to no
reasonable inferences which may support the opposing party’s position.” Finley
v. United States, 82 F.3d 966, 968 (10th Cir. 1997) (quotation marks and citation
omitted). Applying this standard of review, we must determine whether the
district court erred in denying RE/MAX’s motion for judgment as a matter of law
after a trial on the merits.
DISCUSSION
42 U.S.C. §1981 ensures, among other rights, that persons of all races shall
have equal rights to make and enforce contracts. A § 1981 plaintiff alleging
racial discrimination may prove intentional discrimination through either direct or
circumstantial evidence. Kendrick v. Penske Transp. Servs., 220 F.3d 1220, 1225
(10th Cir. 2000). Mr. Tyler presented no direct evidence, and thus, our review is
limited to indirect evidence of discrimination.
-6-
Our approach in this context is governed by our analysis in Stewart v.
Adolph Coors Co., 217 F.3d 1285, 1288 (10th Cir. 2000). Specifically, in our
review of the sufficiency of the evidence to support the jury’s verdict, we assume
Mr. Tyler met his burden of proving a prima facie § 1981 claim, and the claim
properly went to trial. See id. After a full trial on the merits, “‘the sequential
analytical model adopted from McDonnell Douglas ... drops out and we are left
with the single overarching issue whether plaintiff adduced sufficient evidence to
warrant a jury’s determination that adverse employment action was taken against’
the plaintiff” based on his race. Kendrick, 220 F.3d at 1226 (quoting Fallis v.
Kerr-McGee Corp., 944 F.2d 743, 744 (10th Cir. 1991)); see also Reeves, 120 S.
Ct. at 2106. In other words, after a verdict on the merits, the “burden shifting
framework of McDonnell Douglas is largely irrelevant and the issue is whether
the adverse employment action was motivated by race.” 3 Stewart, 217 F.3d at
1288 (citing Sanchez, 992 F.2d at 246).
The burden of persuasion is at all times borne by the plaintiff. Reeves, 120
S. Ct. at 2106. The Reeves case explained a plaintiff can meet the burden of
persuasion through a combination of a prima facie case and “‘sufficient evidence
3
RE/MAX concedes the McDonnell Douglas burden-shifting analysis is no
longer relevant after a full trial on the merits.
-7-
to find that the employer’s asserted justification is false.’” Stewart, 217 F.3d at
1288 (quoting Reeves, 120 S. Ct. at 2108). Having assumed the prima facie case
was shown, we review the record to determine whether Mr. Tyler presented
sufficient evidence to show RE/MAX’s asserted justifications were pretextual. 4
Stewart, 217 F.3d at 1288.
Mr. Tyler wrote a letter to Ms. Bond just days after he learned over the
telephone his application was denied. At trial, he presented the letter and
testified Ms. Bond listed four reasons for the rejection: (1) lack of market share;
(2) RE/MAX already has five percent market share in the area; (3) no qualified
4
RE/MAX raises one issue on appeal: “[D]id Tyler fail to present
evidence from which a jury would be permitted to conclude that RE/MAX’s
decision not to sell Tyler a franchise was based on Tyler’s race?” RE/MAX
categorizes Mr. Tyler’s evidence into three categories: statistical, comparative,
and circumstantial evidence of pretext. We are in no way obligated to accept
RE/MAX’s characterization of Mr. Tyler’s evidence. Moreover, as we stated in
Stewart, our inquiry after a trial on the merits is whether there was sufficient
evidence presented for the jury to infer RE/MAX’s reasons were pretextual. 217
F.3d at 1288. RE/MAX did not list as one of its justifications Mr. Tyler’s lack of
qualifications compared to the other successful franchisees. Instead, RE/MAX
documented Mr. Tyler’s lack of financial resources, staff, and real estate sales,
standing alone, as the reasons his application was turned down. Cf. Sanchez v.
Philip Morris Inc., 992 F.2d 244, 245 (10th Cir. 1993) (employer’s justification
for not hiring plaintiff was he “was not the best qualified” of the applicants).
RE/MAX’s request that we review the “statistical” and “comparative” evidence
amounts to an attempt by RE/MAX to “retry” the prima facie case contrary to
established precedent. For the reasons stated, we focus our review on evidence of
pretext.
-8-
agents on staff; and (4) he was not currently working for a RE/MAX franchise.
Two months later, on July 11, 1994, Ms. Bond wrote a response letter
listing her reasons for the rejection. She admits, “[a]lthough it is not our practice
to respond in writing to franchise prospects regarding acceptance or denial, we
are responding to your request for a written response.” She wrote, at the
conclusion of her letter, “We have not addressed a number of the areas you
brought up in your May 9, 1994 correspondence. Much of the information cited
in your letter is not correct.” She listed seven justifications for denying Mr.
Tyler’s application, under the two main headings “credit/financial resources” and
“conversion criteria”. On appeal, RE/MAX argues Mr. Tyler failed to show five
of Ms. Bond’s reasons were pretextual: 5 (1) negative net worth on balance sheet;
(2) “losses of income reflected on the income statement”; (3) market share; (4)
sales volume; and (5) lack of sales associates. 6
5
RE/MAX admitted Mr. Tyler presented sufficient evidence from which
the jury could infer pretext for two of its seven justifications.
6
Ms. Bond testified at trial that an additional reason for Mr. Tyler’s
rejection was his “subpar” office. The jury could reasonably conclude this was a
post hoc justification. See Perfetti v. First Nat’l Bank of Chicago, 950 F.2d 449,
456 (7th Cir. 1991) (“If at the time of the adverse employment decision the
decision maker gave one reason, but at the time of trial gave another reason which
was unsupported by the documentary evidence the jury could reasonably conclude
that the new reason was a pretextual after-the-fact justification.”), cert. denied,
505 U.S. 1205 (1992).
-9-
This presents an unusual situation because both parties have presented
documentary evidence of RE/MAX’s justifications. We are hesitant to allow an
employee (or applicant) to frame the employer’s (or franchisor’s) justifications by
merely sending a letter contemporaneous with the adverse employment action.
See Chapman v. AI Transport, 229 F.3d 1012, 1030 (11th Cir. 2000) (“A plaintiff
is not allowed to recast an employer’s proffered nondiscriminatory reasons or
substitute his business judgment for that of the employer.”). We are disquieted,
however, by an employer who “fully” articulates its reasons for the first time
months after the decision was made. Because it does not alter our decision, we
will review whether Mr. Tyler presented sufficient evidence to find the reasons,
as characterized by RE/MAX, were pretextual.
We are mindful we must not sit as a super-personnel department that
second-guesses the company’s business decisions, with the benefit of twenty-
twenty hindsight, when reviewing whether the employer’s reasons were
pretextual. See Kendrick, 220 F.3d at 1233. However, “[e]vidence indicating that
an employer misjudged an employee’s performance or qualifications is, of course,
relevant to the question whether its stated reason is a pretext masking prohibited
discrimination.” Fishbach v. District of Columbia Dep’t. of Corr., 86 F.3d 1180,
1183 (D.C. Cir. 1996). “‘The factfinder’s disbelief of the reasons put forward by
-10-
the defendant (particularly if disbelief is accompanied by a suspicion of
mendacity) may, together with the elements of the prima facie case, suffice to
show intentional discrimination.’” Reeves, 120 S. Ct. at 2108 (quoting St. Mary’s
Honor Center v. Hicks, 509 U.S. 502, 511 (1993)).
To begin, we are called upon to decide whether a plaintiff must present
sufficient evidence to reject each of the employer’s multiple reasons for its
adverse employment action. RE/MAX argues Mr. Tyler must demonstrate all its
reasons for rejecting Mr. Tyler’s franchise application are pretextual. We agree,
as a general rule, an employee must proffer evidence that shows each of the
employer’s justifications are pretextual. See Wilson v. AM General Corp., 167
F.3d 1114, 1120 (7th Cir. 1999) (“Generally the employee has the burden of
demonstrating that each proffered nondiscriminatory reason is pretextual.”); see
also Combs v. Plantation Patterns, 106 F.3d 1519, 1539, 1543 (11th Cir. 1997),
cert. denied, 522 U.S. 1045 (1998). However, like other circuits, we are
unwilling to apply that rule as rigidly as RE/MAX would like, recognizing that
when the plaintiff casts substantial doubt on many of the employer’s multiple
reasons, the jury could reasonably find the employer lacks credibility. See
Chapman, 229 F.3d at 1049-51 (Birch, J., concurring in part and dissenting in
part) (discussing cases from the Third, Sixth, and Seventh circuits). Under those
-11-
circumstances, the jury need not believe the employer’s remaining reasons. “This
is but common sense: if a person is shown to be a liar in an outrageous manner or
is shown to have lied about a number of issues, the inference that the person is
non-credible, and should not be believed as to other issues, is a reasonable one.”
Id. at 1050. Stated differently, “‘[t]here may be cases in which the multiple
grounds offered by the defendant ... are so intertwined, or the pretextual character
of one of them so fishy and suspicious, that the plaintiff may [prevail].’” Wilson,
167 F.3d at 1120 (quoting Russell v. Acme-Evans Co., 51 F.3d 64, 70 (7th Cir.
1995)); see also Smith v. Chrysler Corp., 155 F.3d 799, 809 (6th Cir. 1998) (“[a]n
employer’s strategy of simply tossing out a number of reasons. . . in the hope that
one of them will ‘stick’ could easily backfire.... [A] multitude of suspicious
explanations may itself suggest that the employer’s investigatory process was so
questionable that any application of the ‘honest belief’ rule is inappropriate.”
(quotation marks and citations omitted)).
Turning to RE/MAX’s proffered reasons, we have carefully reviewed the
record and hold that Mr. Tyler satisfied the requirements of the rule by
establishing sufficient grounds on which the jury could reasonably infer pretext.
Negative net worth on balance sheet:
-12-
RE/MAX demonstrated Mr. Tyler posted his “net worth” at negative
$10,419.95 on his Cheyenne Springs Realty business balance sheet. Mr. Tyler
included this business balance sheet in his Phase I Proposal, which he voluntarily
submitted to RE/MAX as a supplement to his franchise application. Mr. Tyler,
however, presented evidence that his 1993 “Statement of Financial Condition,”
included with his original franchise application, listed his combined business and
personal “net worth” at $194,372.26. In April 1994, Ms. Bond apparently
understood Mr. Tyler had a positive total net worth because she indicated that
RE/MAX wanted Mr. Tyler to contribute $35,000 of his personal assets if he was
awarded a franchise. Furthermore, there was no evidence Ms. Bond expressed
any concern about Mr. Tyler’s net worth in her communications with Mr. Tyler.
If she had expressed concern, Mr. Tyler testified he would have explained to her
the negative net worth indicated in the Phase I proposal failed to take into account
his personal net worth. Construing this evidence in Mr. Tyler’s favor, as we
must, we hold the jury could reasonably infer: (1) Ms. Bond understood “net
worth” to reflect both personal and business assets, and (2) in attempting to
justify the decision to deny Mr. Tyler’s application Ms. Bond disingenuously
disregarded Mr. Tyler’s personal net worth as documented in his original
application. Mr. Tyler, therefore, presented sufficient evidence upon which the
jury could reasonably conclude RE/MAX’s first reason was pretextual.
-13-
No market share:
Ms. Bond’s July letter to Mr. Tyler was silent on the time frame in which
she believed Mr. Tyler had no market share or real estate sales. RE/MAX now
contends Mr. Tyler had no sales in the first quarter of 1994, based on Ms. Bond’s
testimony she perused a “sold list” she obtained from the Colorado Springs Multi-
List.
The parties dispute whether Ms. Bond even inquired about his alleged lack
of market share. Ms. Bond testified she expressed her concern to Mr. Tyler about
his lack of market share during their April meeting, but Mr. Tyler’s only response
was he was too busy with the proposed franchise. Mr. Tyler testified Ms. Bond
never asked him whether he had any sales in 1994, even though logically he was
the person with the most current sales information. According to Mr. Tyler, Ms.
Bond never expressed her concern about market share until after RE/MAX
rejected his application. It is well within the jury’s prerogative to reject Ms.
Bonds’ testimony and instead reasonably infer Mr. Tyler would have provided the
market sales information if Ms. Bond had asked. 7
7
Mr. Tyler documented over $300,000 worth of real estate closings during
the first quarter of 1994. He did not supplement his application with those
documents, however, because, according to Mr. Tyler, Ms. Bond did not ask him
about his 1994 sales.
-14-
Mr. Tyler presented evidence Ms. Bond was aware he recorded over two
million dollars in sales for 1992, and four million dollars in sales for 1993.
Moreover, Ms. Bond admitted it is plausible a person can consummate a real
estate sale during the first quarter, but not the have the sale recorded in the Multi-
List “sold list” until the second quarter. We conclude the combination of Ms.
Bond’s knowledge of Mr. Tyler’s sales in 1992 and 1993, her failure to inquire
about any 1994 sales, her lack of specificity in narrowing her concern over sales
to 1994, and the conceded imperfection of the evidence she purportedly relied on,
provide ample support for the jury to find her proffered reason unworthy of
credence.
No sales volume:
RE/MAX concedes the analysis of this proffered justification is “identical
to the analysis of the market share point.” The evidence sufficient to prove this
reason is essentially the same as that set forth to undermine the “lack of market
share” reason; thus, no independent evaluation is required. Mr. Tyler prevails on
this point as well.
Lack of Sales Associates:
The evidence is undisputed RE/MAX did not require an applicant to have a
-15-
minimum number of agents before opening a franchise. 8 After opening a
franchise in the Colorado Springs area, however, RE/MAX required a sales
associate quota of at least seven associates after one year, fifteen after two years,
and twenty by the end of the third year. Mr. Tyler’s personal history form
submitted with his application stated he had two full time sales associates. Mr.
Tyler was a broker and agent, and his daughter, who worked for him, was a
licensed agent. He also had a part-time agent. Based on this evidence, the jury
could reasonably reject Ms. Bond’s concern over lack of sales associates as a
pretextual justification for rejecting Mr. Tyler’s franchise application.
“Losses of income reflected on the income sheet”:
Ms. Bond’s letter to Mr. Tyler in July 1994 summarily indicated Mr. Tyler
had losses “on the income sheet” as a reason for RE/MAX’s denial of Mr. Tyler’s
application. Ms. Bond did not identify which “income sheet” she relied on, and
further failed to define the time frame in which Mr. Tyler allegedly suffered a
loss. We assume she was referring to the document in the supplemental Phase I
Proposal titled “Income and Expenses -Actual,” which showed a “net income
8
Mr. Tyler presented evidence the Coopers, who RE/MAX admitted were
similarly situated applicants, had no real estate agents on staff at the time they
applied, but were granted a franchise.
-16-
(loss)” to Cheyenne Springs Realty of $5,932.45 in 1993.
Mr. Tyler’s “Statement of Income” submitted with his September 1993
application listed his business income as exceeding $156,000, with expenses less
than $94,000. He showed his business made a net profit of $62,858.81 through
August 1993. Mr. Tyler explained to the jury Ms. Bond never indicated any
concern about Mr. Tyler’s potential loss during her April visit or her May
telephone call. Mr. Tyler again testified that if he had been asked about the
$5,932.45 loss, he would have explained the statement showed a “loss” because
his accountant mistakenly treated Mr. Tyler’s commission as an “expense” rather
than a “draw.” Because we draw all reasonable inferences in favor of the
nonmoving party, we find Mr. Tyler presented sufficient evidence for the jury to
disbelieve Ms. Bond’s belated rationale that RE/MAX rejected Mr. Tyler’s
franchise application because he had a loss. Our holding is further fortified by
our conclusions the jury could reasonably infer all RE/MAX’s previous
justifications were pretextual. If the jury found, as a whole, Ms. Bond was not
credible, its decision to reject her proffered reason Mr. Tyler had “losses of
income” is, likewise, reasonable. See Chapman, 229 F.3d at 1050.
-17-
CONCLUSION
For the reasons stated, we are not convinced the evidence points but one
way, and is susceptible to no reasonable inferences supporting Mr. Tyler’s claim.
Finley, 82 F.3d at 968. We therefore hold Mr. Tyler presented sufficient evidence
Ms. Bond’s reasons for rejecting his franchise application were pretextual, thus
permitting the jury to reasonably infer RE/MAX intentionally discriminated
against him on the basis of race, in violation of 42 U.S.C. §1981. We AFFIRM
the district court’s denial of RE/MAX’s motion for judgment as a matter of law.
-18-
Tyler v. RE/MAX Mountain States, Inc.
Court: Court of Appeals for the Tenth Circuit
Date filed: 2000-11-21
Citations: 232 F.3d 808
Copy CitationsCombined Opinion