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Alleging director violated Macy’s anti-bias policy didn’t mean he acted contrary to Macy’s interests

By Joy P. Waltemath, J.D.

Reasoning that when corporate agents violate company policy or codes of conduct, it doesn’t necessarily mean they are acting against corporate interests and “may in fact benefit the company at least in part,” the Fifth Circuit found a Macy’s employee had not shown its director of asset protection had acted willfully and intentionally to serve solely his personal interests at Macy’s expense when he allegedly violated Macy policy against disability and veteran’s status discrimination. Because the employee had not alleged that Macy’s complained about the director’s alleged policy violations, he had not adequately pleaded that the director was acting against Macy’s interests and solely in his own to support his tortious interference with his employment contract claim. Absent those allegations, the director was improperly joined to his state court lawsuit to defeat diversity (Alviar v. Lillard, April 14, 2017, Higginson, S.).

State court claims. The asset protection manager was diagnosed with Post Traumatic Stress Disorder (PTSD) after military service. He claimed the director of asset protection for Macy’s discriminated against him through his expressed hostility to his PTSD and his inappropriate statements. When Macy’s fired the employee, he sued in Texas state court, claiming disability bias based on his PTSD as well as tortious interference with his employment contract by the director. Specifically, he alleged that the director interfered with his contract by firing him and by making the performance on his contract more difficult because of his disability and veteran’s status, in violation of Macy’s expressed policy and contrary to the interests of Macy’s.

Macy’s removed the suit to federal court on the basis of diversity jurisdiction, contending that the lower court should ignore the in-state and non-diverse citizenship of its director because he was improperly joined to defeat diversity. Arguing that the director had acted in his own interest (not Macy’s) in interfering with his employment contract, the employee moved to remand. Meanwhile, the director moved to dismiss the suit against him; agreeing, the district court denied the motion to remand and granted the director’s motion to dismiss with prejudice.

Improper joinder. To determine whether an in-state or non-diverse defendant has been properly joined, a court may conduct “a Rule 12(b)(6)-type analysis” to determine whether the complaint states a claim under state law against the non-diverse defendant, the Fifth Circuit pointed out, examining Texas law. The critical issue was whether the director, as Macy’s agent, had acted willfully and intentionally to serve his personal interests at Macy’s expense; mixed motives would be insufficient. To that end, the district court had found no allegations that suggested the director was acting solely to serve his own personal interests, and the appeals court agreed.

Acting “solely in his own interests.” The complaint contained no allegations regarding how the director’s alleged conduct benefitted him personally at all, and although the employee suggested the court could infer that the director was acting solely in his own interests from allegations that the director acted in violation of Macy’s internal policies, that was not enough. Under Texas law, “[i]f a corporation does not complain about its agent’s actions, then the agent cannot be held to have acted contrary to the corporation’s interests,” recited the court, holding the employee did not adequately plead that the director acted “willfully and intentionally at the expense of Macy’s.”

Violation of employer policies insufficient. The appeals could was not persuaded by an unpublished federal district court decision where the Northern District of Texas found it could “reasonably infer from the fact that [the agent’s] actions violated [the company’s] code of conduct and policies that [the company] disapproved of [the agent’s] actions and, therefore, that he must have been acting solely in his own interests when he took them,” Rejecting this rationale, the Fifth Circuit pointed out that it contradicts the clear language of the Texas Supreme Court, which requires a “complaint” by a corporation about its agent’s actions. The mere fact that corporate policies exist does not mean that any action taken in violation of those policies is taken at the expense of the company—violating corporate codes of conduct or internal policies “may in fact benefit the company at least in part,” the appeals court reasoned.

But even if the court could infer that an agent who violates corporate policy is necessarily acting at the expense of the corporation, that still was not enough to show that the agent was acting solely in his personal interest. And because corporate policies and codes of conduct are ubiquitous, the appeals court said the practical effect of holding otherwise would be that “plaintiffs in employment discrimination suits would be able to plead tortious interference against an individual corporate agent and possibly defeat diversity jurisdiction in nearly every employment discrimination case.”

However, the court did find that when the district court determined the director was improperly joined, it effectively dismissed the employee’s claim against him without prejudice due to lack of subject matter jurisdiction. To tidy things up, the appeals court thus remanded to the district court with instructions to vacate its dismissal with prejudice.