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Dochniak v. Dominium Mgmt. Svcs.: US District Court: TORTS | EMPLOYMENT - no attorney fees for employee barring employer's negligence claim by indemnity right

15
UNITED STATES DISTRICT COURT
DISTRICT OF MINNESOTA
JAMIE L. DOCHNIAK,
Plaintiff/Counterclaim Defendant,
v.
DOMINIUM MANAGEMENT
SERVICES, INC.,
Defendant/Counterclaim Plaintiff.
Civil No. 06-237 (JRT/FLN)
MEMORANDUM OPINION AND
ORDER DENYING MOTIONS FOR
ATTORNEY’S FEES
Kathryn M. Engdahl, METCALF, KASPARI, HOWARD, ENGDAHL
& LAZARUS, P.A., 333 Parkdale Plaza, 1660 South Highway 100,
Minneapolis, MN 55416, for plaintiff.
Malcolm P. Terry, MESSERLI & KRAMER P.A., 1800 Fifth Street
Towers, 150 South Fifth Street, Minneapolis, MN 55402, for defendant.
Plaintiff Jamie Dochniak brought an action against her former employer,
Dominium Management Services, Inc. (“Dominium”), alleging hostile work environment
and retaliation claims under Title VII and the Minnesota Human Rights Act. Dominium
asserted counterclaims of malicious prosecution, abuse of process, and negligence. On
September 6, 2007, this Court granted Dominium’s motion for summary judgment on
Dochniak’s claims. The Court also granted Dochniak’s motion for summary judgment
on Dominium’s counterclaims. This matter is now before the Court on the parties’
motions for attorney’s fees. For the reasons discussed below, the Court denies the
motions.
- 2 -
BACKGROUND1
Plaintiff Jamie Dochniak was employed by Dominium, a residential property
management company, from October 2001 until her termination on December 7, 2005.
In early 2003, Dochniak was moved into the position of leasing consultant for
Dominium’s residential property in Oakdale, Minnesota. Dochniak had various
performance problems as a leasing consultant, resulting in nine non-disciplinary writeups
between June 2003 and February 2004 and placement of the Oakdale property on
Dominium’s “problem property” list. Dochniak was removed from the position on
February 17, 2004, and reassigned to the groundskeeper position.
Dochniak alleged that an assistant manager at Oakdale, Mike Mumaw, began
sexually harassing her around the time of her demotion, making offensive comments to
Dochniak on social occasions and during three telephone conversations at work.
Dochniak argued that her demotion was ultimately the result of her refusal to submit to
Mumaw’s sexual advances and that Mumaw’s conduct created a hostile work
environment at Dominium.
The Court granted Dominium’s motion for summary judgment on these claims,
finding that Dochniak had set forth no genuine issue of material fact to support her
contention that her refusal to submit to Mumaw’s advances resulted in her demotion.
The Court further determined that the conduct alleged by Dochniak was not sufficiently
severe or pervasive to constitute harassment affecting a term or condition of employment,
1 The facts are set forth in greater detail in the Court’s Memorandum Opinion and Order
dated September 6, 2007.
- 3 -
and that Dochniak had not established that Dominium failed to take prompt remedial
action to asses the alleged harassment.
Dochniak continued to have performance problems, including repeated tardiness,
following her demotion to groundskeeper for the Oakdale property. On the night of
December 6, 2005, while on call for the Oakdale property, Dochniak slept through
multiple pager calls from Oakdale tenants regarding an emergency water pipe break. The
water pipe break caused severe flooding in several Oakdale apartments and resulted in
approximately ,000 in damages. Dochniak was terminated the following day.
Dochniak alleged that she was terminated in retaliation for her complaints of sexual
harassment. Dominium alleged that Dochniak was negligent in sleeping through the
pager calls.
With respect to Dochniak’s retaliation claim, the Court granted Dominium’s
motion for summary judgment, finding insufficient evidence of a causal connection
between Dochniak’s protected conduct and her termination, and that Dominium had a
legitimate, non-discriminatory reason for Dochniak’s termination. The Court also
granted Dochniak’s motion for summary judgment on Dominium’s negligence
counterclaim. The Court determined that Dominium was required to indemnify
Dochniak for the alleged negligence under Minnesota Statute § 181.970 because there
was insufficient evidence to establish that Dochniak’s failure to respond to the pages was
intentional or in bad faith.
- 4 -
ANALYSIS
I. DOMINIUM’S MOTION FOR ATTORNEY’S FEES
Dominium argues that it is entitled to attorney’s fees as the prevailing party on
Dochniak’s claims under Title VII and the Minnesota Human Rights Act. See 42 U.S.C.
§ 2000e-5(k); Minn. Stat. § 363A.33, subd. 7. The fee shifting provision of Title VII was
intended to make it easier for plaintiffs of limited means to bring meritorious lawsuits,
and “to protect defendants from burdensome litigation having no legal or factual basis.”
Christiansburg Garment Co. v. EEOC, 434 U.S. 412, 420 (1978). The Court has
discretion to award attorney’s fees to the prevailing defendant if it finds that “the
plaintiff’s action was frivolous, unreasonable, or without foundation, even though not
brought in subjective bad faith.” Id. at 421; see also Sigurdson v. Isanti County, 386
N.W.2d 715, 722-23 (Minn. 1986) (applying similar standard to claims brought under the
Minnesota Human Rights Act). However, the fact that a plaintiff did not prevail on its
discrimination claim is not by itself sufficient to establish that the action was
unreasonable or without foundation. Id. So long as the plaintiff had “some basis” for the
discrimination claim, the prevailing defendant may not recover attorney’s fees. EEOC v.
Kenneth Balk & Assocs., Inc., 813 F.2d 197, 198 (8th Cir. 1987).
The Court disagrees with Dominium that Dochniak’s discrimination claims were
frivolous, unreasonable, or without foundation. Dochniak refused Mumaw’s sexual
advances one day prior to her demotion from the leasing consultant position, and may
have believed that Mumaw, whose stepfather had been a senior Dominium officer, was
likely to become her next manager at the Oakdale facility. While the Court ultimately
- 5 -
found insufficient evidence of causation between the alleged harassment and Dochniak’s
demotion, it cannot be said that Dochniak had no factual basis upon which to bring her
discrimination claims. Cf. Hales v. Prudential Ins. Co. of Am., 2002 WL 31242213, at *3
(D. Minn. Oct. 3, 2002) (finding attorney’s fees appropriate where there was an “utter
lack of any foundation for Plaintiff’s age discrimination claim”).
Similarly, the Court’s determination that Mumaw’s alleged conduct did not give
rise to a hostile work environment does not establish that Dochniak’s claim was frivolous
or unreasonable. Indeed, the Court specifically acknowledged that Dominium’s six-week
delay in investigating Dochniak’s harassment complaint was troubling, and that such a
delay could under certain circumstances render an employer’s remedial action
unreasonable. Further, although the Court found that Mumaw’s actions did not rise to the
level of severe or pervasive conduct necessary to establish a hostile work environment,
they provided Dochniak with some basis upon which to pursue the discrimination claims.
With respect to Dochniak’s retaliation claim, Dochniak argued, and Dominium
conceded, that Dochniak had engaged in protected activity and that she suffered an
adverse employment action. The fact that Dochniak could not show a causal connection
between her protected conduct and her termination does not make her claim frivolous or
unreasonable. Dochniak made plausible, if ultimately unsuccessful, arguments that there
was indirect evidence of a causal link between her complaint to the EEOC, the issuance
of a right to sue letter, and her termination, including the temporal proximity between
these events. Dochniak also pointed to other Dominium employees who were not
terminated after sleeping through pagers while on duty, but the Court ultimately found
- 6 -
that these employees were not similarly situated for purposes of inferring a causal
connection.
In sum, Dominium has failed to show that Dochniak’s discrimination claims were
frivolous, unreasonable, or without foundation. Accordingly, the Court denies
Dominium’s motion for attorney’s fees.
II. DOCHNIAK’S MOTION FOR ATTORNEY’S FEES
Dochniak seeks attorney’s fees and costs in connection with her defense against
Dominium’s negligence counterclaim. Dochniak argues that she is entitled to mandatory
indemnification under Minnesota statutes, and that these statutes require Dominium to
pay her costs in defending Dominium’s negligence action. See Minn. Stat. §§ 181.970,
302A.521. Dominium responds that the Minnesota indemnification statutes cannot be
construed to require an employer to pay an employee’s costs of defending a suit brought
by the employer. According to Dominium, such a construction produces an absurd result
because it would effectively require Dominium to defend and indemnify Dochniak for the
very losses it seeks to recover through its negligence action. Dominium also argues that
the fees and costs incurred by Dochniak in defending against the negligence counterclaim
were duplicative of those incurred in prosecuting the discrimination claims.
Under Minnesota’s general indemnification statute, an employer shall
defend and indemnify its employee for civil damages, penalties, or fines
claimed or levied against the employee, provided that the employee
(1) was acting in the performance of the duties of the employee’s
position;
- 7 -
(2) was not guilty of intentional misconduct, willful neglect of
the duties of the employee’s position, or bad faith; and
(3) has not been indemnified by another person for the same
damages, penalties, or fines.
Minn. Stat. § 181.970, subd. 1. Minnesota business corporations are also required to
provide mandatory indemnification to employees for actions or omissions taken in their
official capacity. Minn. Stat. § 302A.521. Under § 302A.521, indemnification is
required for the employee’s acts or omissions if the employee (1) has not been
indemnified by another organization or employee benefit plan, (2) acted in good faith, (3)
received no improper personal benefit, and (4) reasonably believed that the conduct was
in the best interest of the organization. Minn. Stat. § 302A.521, subd. 2.
In granting summary judgment to Dochniak on Dominium’s negligence claim, the
Court found that Dominium had failed to establish a genuine issue of material fact that
Dochniak acted intentionally or in bad faith. The Court thus determined that, absent
some evidence of intent or bad faith, the mandatory indemnification provisions
effectively precluded Dominium’s negligence claim against Dochniak, making summary
judgment in favor of Dochniak appropriate. Dochniak now contends that the Court’s
finding of mandatory indemnification requires Dominium to pay Dochniak’s attorney’s
fees and costs.
Courts in this district have held that the Minnesota indemnification statutes
preclude negligence claims by an employer against its employee because “to hold
otherwise renders a circular result: An employer would have to defend and indemnify an
employee for losses the employer seeks from the employee.” Cenveo Corp. v.
- 8 -
Celumsolutions Software GMBH & Co. KG, 504 F. Supp. 2d 574, 579 (D. Minn. 2007);
see also Carlsen v. Green Thumb, Inc., 2004 WL 234406, at *8 (D. Minn. Feb. 4, 2004)
(finding that mandatory indemnification statutes do not immunize plaintiff from liability
where fact issues exist regarding whether the employee acted in good faith).2 Indeed,
Dochniak made this same argument in support of her motion for summary judgment,
arguing that Dominium’s negligence claim was barred absent some evidence of intent or
bad faith. Dominium argues that the same rationale now precludes Dochniak from
obtaining fees and costs from Dominium for its negligence action. According to
Dominium, to award attorney’s fees to Dochniak effectively requires Dominium to
indemnify an employee for the very losses that the employer seeks from the employee.
Dominium cites no authority for its argument, and the Court is not persuaded that
awarding attorney’s fees to an employee that ultimately prevails on an employer’s
negligence claim renders a “circular” result.3 Nevertheless, the Court finds that
Dochniak’s motion for attorney’s fees is precluded in this case. As discussed above,
Minnesota’s indemnification statutes effectively bar an employer from suing its employee
2 While the Court in Carlsen allowed a negligence claim to proceed under the indemnity
statutes because “whether plaintiff acted in good faith, and whether she reasonably believed her
conduct was in the best interest of the corporation” were fact questions precluding summary
judgment. Carlsen, 2004 WL 234406, at *8.
3 The rationale for precluding an employer’s negligence claim against its employee is that
an employer’s success on such a claim produces a “zero-sum” situation. See Cenveo Corp., 504
F. Supp. 2d at 579. If an employer’s negligence claim were allowed to go forward, however, and
the employee ultimately prevailed, the employee would have incurred costs and fees recoverable
as indemnity under Minn. Stat. §§ 181.970 and 302A.521. Because the mandatory
indemnification statutes do not require an employee to indemnify its employer, the “zero sum”
rationale would not operate to preclude the employee’s claim for fees and costs.
- 9 -
for negligence, since any damages, costs, or fees awarded pursuant to such an action
would have to be returned to the employee as indemnification. Thus, an employee who is
sued for negligence by her employer may successfully defend such a claim merely by
establishing her right to mandatory indemnity, just as Dochniak did here, rather than by
litigating negligence on the merits. Under general principles of indemnity law, however,
attorney’s fees sought as indemnity are limited “to those [fees] incurred in the defense of
the claim indemnified against, and there should be no recovery for fees and expenses
incurred in establishing the right of indemnity.” Bagby v. Merrill Lynch, Pierce, Fenner,
& Smith, Inc., 491 F.2d 192, 198 (8th Cir. 1974); cf. Seifert v. Univ. of Minn., 505 N.W.2d
83, 86-87 (Minn. Ct. App. 1993) (allowing contractual indemnification for attorney’s fees
and costs incurred in establishing the right of indemnification only if the contract
explicitly allows it).
In this case, Dochniak successfully defended against her employer’s negligence
claim by establishing her right of indemnity.4 Thus, any costs or fees incurred by
Dochniak in connection with her defense of Dominium’s negligence claim are not
recoverable as indemnity. This is not to say that an employee may not under any
circumstances recover fees associated with defending against an employer’s negligence
4 The Court notes that such a situation is unlikely to arise where an employee is sued by a
third party. In such a case, an employee’s defense of “mandatory indemnification” would have
little bearing on a third party’s negligence suit. Thus, any attorney’s fees incurred by an
employee in defense of a third party negligence claim would necessarily relate to the underlying
merits of the negligence claim, and would be subject to mandatory indemnification by the
employer under Minnesota statute.
- 10 -
claim. The Court is mindful that defendants sued for employment discrimination may
assert potentially abusive counterclaims solely to deter the lawsuit or to gain a perceived
tactical advantage.5 In such cases, fees and costs may be awarded if the Court determines
that the pleading or motion was presented for an improper purpose, such as to harass the
plaintiff. See Fed. R. Civ. P. 11(c). Where an employee defends against her employer’s
negligence claim by asserting a mandatory right of indemnification, however, the
employee may not recover costs and attorney’s fees incurred in that defense as indemnity
under Minnesota statute. For these reasons, the Court denies Dochniak’s motion for
attorney’s fees and costs in connection with Dominium’s negligence counterclaim.
ORDER
Based on the foregoing, all the files, records, and proceedings herein, IT IS
HEREBY ORDERED that:
1. Dominium’s Motion for Attorney Fees [Docket No. 99] is DENIED.
2. Dochniak’s Motion for Attorney Fees and Costs [Docket No. 91] is
DENIED.
DATED: April 1, 2008 s/ John R. Tunheim _
at Minneapolis, Minnesota. JOHN R. TUNHEIM
United States District Judge
5 An employer’s negligence claim against an employee is not frivolous or improper
merely because Minnesota’s mandatory indemnification statutes generally preclude negligence
claims. Under Minn. Stat. §§ 181.970 and 302A.521, indemnification is not required where the
employee acted intentionally or in bad faith. Thus, an employer’s tort claims against an
employee may proceed where fact issues exist regarding whether the employee acted
intentionally or in bad faith. See, e.g., Carlsen, 2004 WL 234406, at *6.
 

 
 
 

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