Fifth Circuit Appeals Court issues multi-faceted ruling on employment dispute

By Sandra Lane | Jun 16, 2018

NEW ORLEANS —  An employment dispute between a seller of ocean-going cruises and one of its sales people was reviewed by a three-judge panel in the U.S. Court of Appeals for the Fifth Circuit on April 23, resulting in a mixed verdict.

The case was argued before Judges Gregg J. Costa, Jacques L. Wiener, Jr. and Stephen A. Higginson. 

“Finding numerous disputes of material fact, we reverse in part, affirm in part, vacate the district court’s award of attorneys’ fees, damages, and injunctive relief and remand for further proceedings, Higginson wrote in the court's ruling. 

The dispute arose when Karen D’Onofrio, a sales representative for Vacation Publications Inc., doing business as Vacations to Go (VTG), decided to take family leave time after her husband was injured in an auto accident.  She was granted the time off and while being at home discussed with her husband Michael, what they might do to bring in extra income since he was now unable to work in his usual occupation.

Michael D’Onofrio had worked as an aerospace engineer and supplemented his income with various direct-sales ventures. Now unable to physically travel and lift the items he was selling, he and his wife decided to start their own travel agency. They decided to purchase a franchise of CruiseOne, a company that sells cruises and other travel-related products and services.

When Karen D’Onofrio asked for the time off, VTG offered her the option of taking unpaid FMLA leave or logging in remotely a few times per week so that she could continue to serve her existing accounts and retain the commissions from those. However, she failed to do this and her supervisor discovered that there were 110 unanswered emails on her computer.

As a result, another employee at VTG took over her clients and one manager mistakenly told 23 clients that Karen D’Onofrio no longer worked there. Shortly thereafter, VTG notified Karen D’Onofrio that her family leave had expired and asked if she was going to return, to which she responded that she was not because she believed she had been terminated. 

By that time, the D’Onofrios were working at their new business from home. During her time off, Karen D’Onofrio had attended a training school for CruiseOne, the company she and her husband were going to represent.

Eventually, VTG sued the D’Onofrios, who then filed a countersuit heard in U.S. District Court for the Southern District of Texas. Afterwards, both plaintiffs and defendants appealed to the Fifth Circuit Appeals Court in New Orleans.

This is a complex case with many allegations and many rulings, as follow:

FMLA Interference. Karen said that the district court erred by granting summary judgment against her claims of FMLA interference. The appeals court said “VTG did not interfere with Karen’s FMLA rights, and we affirm the grant of summary judgment on Karen’s FMLA claims.”

Hostile Work Environment. The district court granted summary judgment on Karen’s hostile work environment claim but failed to give notice of its intent to grant summary judgment. Because of that oversight, the appeals court ruled, “We therefore reverse the grant of summary judgment on Karen’s hostile work environment claim.” She had also claimed sexual harassment.

Breach of Contract.  Karen said that the district court erred in granting summary judgment on VTG’s claim for breach of contract. Judge Higginson said, “We are remanding this issue to the trial court because the record was unclear as to who former employee’s customers were.”

Conversion of Confidential Information.  The appeals court reversed the district court’s ruling on this issue.  “There is a dispute of fact as to whether Karen exercised dominion or control over that information in an unlawful manner,” said Judge Higginson.

Claim for damages.  The appeals court reversed the district court’s summary judgment on this claim. “Aside from the speculative nature of the calculation, VTG failed to establish that the full gross revenues the D’Onofrios generated was equal to the fair market value of the allegedly converted confidential information.”

Tortious interference with an existing and a prospective business relationship.  Once again, the appeals court reversed the district court’s decision saying, “We find issues of material fact that preclude summary judgment and reverse.  Conspiracy Claims. The appeals court ruled that “Because we reversed summary judgment on the underlying claims for conversion and tortious interference, so, too, do we reverse summary judgment on the conspiracy claims.” The appeals court said that the sales Karen generated for CruiseOne were the result of her own personal contacts and not any sales lists or other confidential information from VTG.

Fraud Claims.  VTG asserted claims against Karen for common-law fraud and fraud by nondisclosure, alleging that she misrepresented her need for FMLA leave and failed to disclose her ownership interest in the CruiseOne franchise and the fact that she was using her FMLA leave to attend CruiseOne training. The appeals court said “Once again, we find disputes of material fact and reverse. VTG failed to establish an injury caused by Karen’s allegedly wrongful conduct. VTG’s evidence with respect to damages is insufficient to establish injury as a matter of law caused by Karen’s allegedly wrongful conduct.”

In conclusion, Judge Higginson said, “For the foregoing reasons, we affirm in part, reverse in part, vacate the awards of damages, injunctive relief, and attorneys’ fees, and remand for further proceedings consistent with this opinion.”

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