Montana Supreme Court Affirms Sexual Harassment and Retaliation Findings

Source: Montana Law Week

SEXUAL HARASSMENT: HRC correctly determined that electric co-op office manager was subjected to severe and/or pervasive sexual harassment by GM and not mere “flirting” and was retaliated against… HRC’s “front pay” of $505,957 improperly increased to $1,379,338 by Court, proper damages total is HRC’s $758,454.52… $519,837 fees properly awarded, enhancement properly rejected… Laird affirmed, reversed.

Shalaine Lawson, a CPA, began employment with NorVal Electric Cooperative in Glasgow in 12/10 and became office manager and CFO in 1/15. She received satisfactory evaluations and was given wage increases. In 5/17 GM Craig Herbert began personal interactions with her. During a work-related car ride in 5/17 he asked why she had begun wearing false eyelashes, stating that “when women go and try to improve their looks it’s because they’re looking to have an affair.” Lawson, disturbed by his insinuation, ceased wearing false eyelashes to work. In 6/17 when they were discussing an upcoming conference with NorVal’s bank Herbert asked if she had ever “fooled around” with a banker connected to the conference. Disturbed by the comment, she did not attend the conference. Later that month she mentioned taking her son to a football camp in Bozeman and having a massage while there. Later that day Herbert asked if her husband gave her massages, adding, “I just wanted you to know that given the opportunity I give a really good massage and if we’re ever given the opportunity I would like to get you relaxed.” She did not respond and left Herbert’s office feeling “degraded, dirty, and really uncomfortable.”

Soon thereafter Lawson was in Herbert’s office discussing NorVal’s annual audit and mentioned that her back hurt. He told her to turn around and cross her arms, closed the office door, and approached her from behind. He embraced her, lifted her up, and popped her back, smelling her hair in the process. She felt his actions were inappropriate. After not speaking in several days she was in his office to discuss a work matter. At the end of the conversation he requested a hug, “just for friends,” and then gave her a hug.

In 7/17 while Lawson was using the copy machine Herbert said “you are filling your pants out nicely.” She interpreted it as expressing interest in a sexual relationship and threw the pants away. During that summer he entered her office when she was alone and inquired about her sex life. In 8/17 during a time that NorVal was doing power shutoffs she entered his office and asked, “Are there things that turn you off?” He used the term “turn off” in a sexual manner several times throughout the day in her presence.

During NorVal’s 9/17 board meeting, without Lawson present, several members joked about a sexual relationship between her and Herbert. One had previously accused them of having an affair after her promotion to office manager. She learned of the accusation through Herbert and was upset by it and NorVal’s failure to investigate or allow her to respond. In 10/17 Lawson and Herbert were at a conference in Great Falls. They had arranged to have a work meeting. He asked her to meet him in his hotel room for the meeting and had a key for her. The Hearing Officer found that his purpose was to allow her to enter his room separately to avoid raising suspicions and to engage in sex. She refused and became upset. He texted her later and asked to have the meeting beside the hotel pool, which they completed without incident.

On 10/6, back in NorVal’s offices, Lawson felt that she needed to tell Herbert that she needed to report the hotel incident or find another job. Although she suspected that he would fire her, she informed him that she had documented it. She considered this her initial complaint of sexual harassment because of NorVal’s policy requiring discrimination and harassment to be reported to the supervisor or GM. The HO concluded that Lawson’s actions during the meeting constituted the oral making of a harassment complaint. On 10/9 Herbert and Lawson again met and, despite her request for a Board member to attend, none was present. Herbert informed her that “they needed to work it out or she needed to go,” to which she requested guidance as to how to report her complaint in writing. He told her to speak only with him. When she questioned the propriety, he repeated it. He verbally notified the Board of her complaint. She asked him repeatedly how she could formally submit her complaint. He did not provide instructions and the Board did not meet with her despite her repeated requests.

On 10/10/17 Lawson received a letter from NorVal’s attorney Matthew Knierim notifying her that she was being formally reprimanded by Herbert for creating a toxic environment, failing to understand the chain of command, challenging his authority, criticizing the Board over tax issues, and complaining over a co-worker’s performance, and “this is not acceptable and if it occurs again, you will be immediately terminated for cause.” (Knierim wrote the letter at Herbert’s instance but he had no knowledge of Lawson’s sexual harassment concerns and complaint.) Herbert delivered the letter to Lawson in the office and texted her to call him that evening at which time he offered her a severance package if she would leave immediately. She declined the offer, asserted that she had done nothing wrong, and stated that she just wanted the sexual harassment to end.

The next day Herbert told Lawson that he did not want to sleep with her. He showed her a picture of a woman on his computer and told her that they had spent several months traveling for work, staying in the same room, lying on the same bed, and it was not “a big deal.” Over the following weeks Lawson continued to inquire of Herbert how to properly report her sexual harassment complaint, with no response. She attempted to communicate with Knierim, who said she would have to report to Herbert.

Herbert began treating Lawson in a way she felt degrading or belittling during their work conversations. He told her to notify him whenever she intended to leave the office and removed her from her role as minutes-taker for Board meetings without any job-related justification. She began showering less and stopped wearing nice clothes to “ward him off.” She began suffering a loss of self-worth and confided in her husband about Herbert’s behavior and its effect on her. Her husband began contacting attorneys for advice about recourse for sexual harassment.

He also contacted LCPA Elizabeth Drydahl who strongly recommended Lawson’s hospitalization on account of her severe depression and “plan to harm herself” resulting from “very inappropriate attention from a coworker.” Lawson’s husband took her to the ER where she was diagnosed with “depression and suicidal ideation” and referred to psychiatric NP Jennifer Durward who issued multiple letters forbidding her return to work until conclusion of the sexual harassment investigation. Her eventual report noted that Lawson suffered from a “stress reaction” stemming from “sexual harassment on the job.” Lawson also sought a no-contact order against Herbert from the PD,citing his anger over her accusations.

Lawson contacted the HRB and scheduled an appointment for 11/2/17. She called out of work beginning 11/3/17 for the “extreme stress and anxiety caused by your continued harassment and retaliation and threats.” On 11/10/17 she received a letter from Herbert dated 11/6 notifying her that she was banned from NorVal’s property, her work email and credit card had been revoked, and there would be a meeting to determine her employment. She then received a letter from Knierim dated 11/7 stating that she would be terminated immediately if she pursued a nocontact order. (Knierim testified that he was unaware of her sexual harassment complaint when he drafted this letter.) On 11/21, in response to a request from Lawson to extend her sick leave, Herbert wrote her stating that it would soon expire, reaffirming that he was the sole means of communication with NorVal, and that “all of your previous complaints lodged with NorVal have been investigated.”

Lawson formally filed a complaint with the HRB 11/24/17. Herbert withdrew the severance offer. He disputed her request for extended medical leave because it was based on Durward’s notes, who he stated was “not a physician.” On 1/2/18 Lawson received a payout of her accrued vacation & sick leave but Herbert informed her that she would continue to be listed as an employee until NorVal’s attorneys decided otherwise or she accepted employment elsewhere. She made several attempts to communicate with Herbert and the Board to obtain the results of the asserted investigation but received no response. On 2/5/18 Herbert wrote her that NorVal had filed its Answer with HRB. According to NorVal, she had falsely alleged sexual harassment to cover up “serious deficiencies in your job performance” including a backlog in her work. He told other employees that she was being investigated for possible fraud. No evidence to support such a claim was produced and neither of the 2 accountants hired to fill in for Lawson were asked to investigate such a claim.

On 2/27/18 Lawson amended her complaint to include retaliation. In 4/18 NorVal’s counsel asked her to provide a statement from a “qualified physician” verifying that she was unable to perform her duties. She conferred with Dr. Chris Laviola, PhD, who recommended that she remain off work due to her depression and suicidal ideations. Lawson provided this information to NorVal but received no response. Durward also treated Lawson through 2019, during which she observed a significant reduction in her well-being and connection to the Glasgow community. At the time of Lawson’s suspension her salary was $84,567/yr with 1,184.91/mo benefits. The HRB issued an initial report in 5/18 concluding that no harassment or retaliation had occurred. Lawson filed an objection with the HRC which concluded that the HRB’s initial report was erroneously based on incomplete information or misapprehension of the law and remanded for a hearing. After extensive discovery a contested case hearing was held and Hearing Officer Caroline Holien concluded that she had been subjected to sexual harassment and retaliation and awarded $192,384.89 back pay, $13,635.51 interest on lost wages, $50,000 for emotional distress, and attorney fees. Finding reinstatement not feasible, she found that Lawson was entitled to front pay. Citing Duke (4th Cir. 1991) for the principle that “because of the potential for windfall, [front pay’s] use must be tempered,” she noted that OHA has historically followed the WDEA which allows for lost wages for a maximum of 4 years, and thus awarded $415,786.06 (present value $378,215.59 if paid in a lump sum), reasoning that Lawson worked for NorVal for 7 years prior to going on medical leave and 4 years of front pay would not be unreasonable or an unjust windfall. Both parties appealed to the HRC. NorVal challenged Holien’s finding of discrimination and Lawson argued that she erred by citing the WDEA. The HRC affirmed the finding of discrimination and concluded that use of the WDEA as guidance for calculation of Lawson’s front pay award and the amount of the award were not clearly erroneous. Its final decision slightly altered Holien’s calculations resulting in a small increase in the award: $189,094.30 back pay, $13,402.30 interest on lost wages, $50,000 for emotional distress, and $505,957.92 for a total of $758,454.52 plus attorney fees.

Both parties petitioned for judicial review. Judge Laird upheld the finding of discrimination but concluded that use of the 4-year cap for front pay was arbitrary & capricious and, utilizing Lawson’s expert Ann Adair’s “conservative calculation,” increased Lawson’s front-pay award to $1,379,338, for a total award of $1,631,834.60 plus attorney fees. She conducted a “lodestar” analysis and awarded $519,837 fees and $48,258.88 costs. She declined to apply a multiplier, reasoning that she had already considered Todd Shea’s contingency risk and that the circumstances of his representation did not necessitate a multiplier. NorVal appeals. Lawson cross-appeals Laird’s fee calculation. NorVal argues that the incidents between Herbert and Lawson and its responses do not rise to “severe and/or pervasive” harassment necessary to constitute sexual discrimination as defined in the HRA. It contends that the context of Herbert’s actions was not adequately considered and therefore Laird erred by affirming Holien’s determination that Lawson was subjected to sexual discrimination. However, Holien’s findings are supported by substantial evidence that Herbert subjected Lawson to unwelcome verbal and/or physical conduct of a sexual nature in her work environment. And in consideration of the totality of the circumstances we have little difficulty affirming Holien’s conclusion that a reasonable person would find NorVal’s workplace hostile & abusive. Herbert’s behavior does not constitute “mere intersexual flirtation” as NorVal describes it. NorVal contests Holien’s determination that Lawson was retaliated against by arguing that none of the “constellation” of occurrences fell within the actions listed in ARM 24.9.603(2) and in any event were not materially adverse. However, while not all of the actions constituted material adverse actions, collectively there can be no doubt. There was likewise substantial evidence that NorVal took the actions in retaliation for engaging in protected activities and not for a non-discriminatory purpose such as those offered by NorVal that were merely pretextual. Laird did not err in affirming Holien’s decision that Lawson was subject to retaliation.

Laird erred in increasing Lawson’s front-pay award. Damages are a factual determination for which a court may not substitute its judgment for the agency’s, and may reverse on only narrow grounds including that the agency’s decision is arbitrary & capricious, which Laird determined. §2-4-704(2)(a); MSU-N (Mont. 2021). It is clear that neither Holien nor the HRC applied the WDEA as binding authority. The HRC explained that Holien used it only for guidance. More significantly, Laird’s reasoning that the agency’s reference to the WDEA for a 4-year award was not supported by the findings overlooks that the HRC alternatively determined that Holien’s 4-year award was not clearly erroneous, but rather a correct determination of front pay. Holien premised the 4-year award on Lawson’s 7 years of employment, her likely future difficulties finding similar work, and that this amount would not be unduly speculative, unsupported by the record, or an unjust windfall. The WDEA was no more than a reference point for an award that was otherwise justified by the record. Whether the record may also support a higher award, as Lawson advocates, is not the standard. Board of Oil & Gas Conservation (Mont. 2012) (“A review under the arbitrary and capricious standard ‘does not permit a reversal merely because the record contains inconsistent evidence or evidence which might support a different result. Rather, the decision being challenged must appear to be random, unreasonable or seemingly unmotivated based on the existing record.'”) Under these circumstances, we are hard pressed to conclude that the award was arbitrary & capricious. We conclude that Laird erred in reversing HRC’s front-pay award and therefore reinstate HRC’s determination of front pay.

The record indicates that Shea has practiced law for more than 30 years and attained a good reputation. He initially agreed to charge Lawson $250/hr for his services and $110/hr for paralegal services, but switched to a contingency when it became clear that she would not be able to maintain his fees during the litigation. From 2017 to 2022 he participated in the investigative process before the HRB, appeals to the HRC leading to a contested case hearing, a favorable decision from Holien, and favorable proceedings before the HRC and Court and has handled the appellate proceedings before this Court.

In the District Court he sought compensation at $325/hr and offered expert testimony that this was reasonable given his skills and experience. Laird took guidance from the Kerr (9th Cir. 1975) “lodestar/multiplier test.” She calculated the hours reasonably expended, considered Shea’s skill and performance, the quality of his performance, and the result he obtained, and assessed the difficulty of the case, and concluded that $325/hr and his hours were reasonable and awarded $519,837 fees. She reasoned that the award should not be further enhanced by a “multiplier” because she had considered within her initial lodestar analysis factors that may support a multiplier such as quality of the result, extent of delay, and the economic undesirability of representing the particular class of claims. She reasoned that the increase to $325 reflected “the contingency risk that Shea undertook to represent his client as well as the resulting four-year delay in payment for his services” and “the excellent results obtained and delays in payment.”

Lawson argues that it was inconsistent for Laird to find that Shea charged a reasonable rate of $325 while also finding that $325 reflected the risks & burdens of the litigation, because the $325 is specifically reasonable only for “non-contingency cases.” NorVal notes that the US Supreme Court and this Court have held that a lodestar calculation cannot be enhanced merely based on the risk of contingency representation. Ihler (Mont. 2000) (citing Dague (US 1992)) (“Dague prohibits an enhancement based on contingent risks”).

A “lodestar” amount is calculated by “multiplying the number of hours reasonably spent on the case by an appropriate hourly rate in the community for such work.” Gendron (Mont. 2020) (quoting Tacke (Mont. 2010)). These reasonableness determinations are based on an initial list of factors:

(1) the amount and character of the services rendered;
(2) the labor, time and trouble involved;
(3) the character and importance of the litigation in which the services were rendered;
(4) the amount of money or the value of the property to be affected;
(5) the professional skill and experience called for;
(6) the attorneys’ character and standing in their profession; and
(7) the results secured by the services of the attorneys.

“These factors are nonexclusive, and a district court may rely on other considerations in determining reasonableness.” Id. There is a “strong presumption that the lodestar figure represents a reasonable fee.” Ihler. While a case may justify a multiplier or enhancement, the claimant “has the burden of proving that the requested enhancement is ‘necessary to the determination of a reasonable fee.'” Ihler (citing Dague). To avoid double consideration a multiplier must be determined based on further factors not already considered in the lodestar calculation such as the extent of delay and economic undesirability of representing the class of claims. Audit Services (Mont. 1992); Ihler.

Lawson contends that Laird’s analysis based on the Kerr framework shortchanged consideration of factors such as novelty and difficulty of the questions, her attorney’s preclusion from other employment, time limitations imposed by the circumstances, and awards in other cases. However, while the Kerr factors are not stated identically with the factors of the Montana test, there is considerable overlap and most of the Kerr factors were at least touched upon in Laird’s lodestar analysis. (Notably, her assessment of hours indicated that the case “should have been a simple routine sexual harassment case” were it not for the complications attributed to NorVal’s conduct throughout and the HRB’s initial dismissal.) She stated that she considered additional factors in coming to her lodestar determination, which was her prerogative. Gendron (“A district court may rely on other considerations in determining reasonableness.”). Further, she had wide discretion in determining a reasonable fee award. Id. Thus while the Kerr framework is somewhat different than Montana’s stated framework, and Laird may not have considered all Kerr factors, she had considerable latitude and the award is presumed to be reasonable. We are persuaded that she properly concluded that the award was reasonable and that Lawson has not demonstrated that a multiplier or enhancement was necessary to achieve reasonableness.