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Chalmers v. Quaker Oats Company

August 15, 1995

LELAND R. CHALMERS, PLAINTIFF-APPELLANT,

v.

QUAKER OATS COMPANY, QUAKER OFFICERS' SEVERANCE PROGRAM, DOUGLAS RALSTON, ET AL., DEFENDANTS-APPELLEES.



Appeal from the United States District Court for the Northern District of Illinois, Eastern Division. No. 93 C 349--George W. Lindberg, Judge.

Before BAUER, COFFEY, and FLAUM, Circuit Judges.

BAUER, Circuit Judge.

ARGUED APRIL 6, 1995

DECIDED AUGUST 15, 1995

Leland Chalmers, a former Vice President in Quaker Oats' ("Quaker") Tax Department, filed an action under the Employee Retirement Income Security Act ("ERISA"), 29 U.S.C. sec. 1001 et seq., challenging the Quaker Oats Officers' Severance Program Committee's ("Committee") decision denying him severance benefits after he was discharged for violating Quaker's policy against sexual harassment. The Committee concluded that Chalmers was not entitled to severance benefits because sexual harassment constituted gross misconduct which thereby disqualified him from benefits under the terms of the plan. The district court affirmed the Committee's decision, and Chalmers appeals.

Although Chalmers was fired for conduct occurring in 1992, for a true understanding of the circumstances surrounding this action, we go back to 1988. In February of that year, Karen Brady, at the time a subordinate of Chalmers's, made a formal complaint to Douglas Ralston, Quaker's Senior Vice President for Corporate Human Resources. Brady's complaint alleged that Chalmers had violated Quaker's sexual harassment policy by making several inappropriate sexual comments to her. For example, while standing together in line at a restaurant salad bar, Chalmers allegedly remarked, "nice melons!" When asked about this during Ralston's subsequent investigation, Chalmers admitted making the intended double-entendre but characterized it as simple "boy talk." According to Brady's complaint, in stressing the importance of confidentiality, Chalmers apparently felt compelled to warn Brady not to scream out information about Quaker's business "while in the throes of passion and ecstasy" with her husband. These and other remarks bothered Brady, but when she complained privately to Chalmers, he told her to "lighten up on [her] feminist attitudes."

Acting on Brady's complaint, Ralston conducted a general investigation into the veracity of the allegations. He discovered that Brady was not the only woman who had encountered inappropriate behavior on Chalmers's part. One employee reported that after giving a presentation and asking for comments or questions, Chalmers obliged by telling her that she had "a nice backside." Ralston's investigation also revealed that Chalmers behaved inappropriately at company social events. For instance, at a Quaker party on board a boat on Lake Michigan, Chalmers asked one of the Tax Department secretaries to dance. When she refused, Chalmers picked her up and carried her onto the dance floor. At another function, Chalmers approached an employee named George Pappas and his date, and charmingly asked Pappas's date if she enjoyed "dating fat boys." When no reply was forthcoming from the woman, Chalmers asked Pappas whether he enjoyed "dating fat girls who put out."

Other employees in the department told Ralston that they were reluctant to report incidents of perceived sexual harassment because there was a general fear that Chalmers would retaliate. Awareness of Chalmers's attitude towards sexual harassment made it difficult for Ralston to uncover support for Brady's allegations unless Ralston promised to keep the identities of several witnesses confidential. One employee, Steve Orzechowski, reported that Chalmers had reprimanded him for corroborating a coworker's allegations of sexual harassment against another employee, Steve Vranek. Vranek was eventually fired for violating the sexual harassment policy.

Ralston's investigation led him to believe that Quaker should discipline Chalmers. As a result of the Brady incident, Chalmers's compensation was reduced and he was required to attend seminars on sexual harassment awareness. He was also warned that any repeat occurrences could result in his termination.

On August 20, 1992, Anna Raisor, an executive assistant for Terry Westbrook, Chalmers's immediate superior, asked Chalmers to sign something for Westbrook. At the time, Raisor was temporarily assigned to work for Chalmers because Chalmers's regular secretary was on vacation. Chalmers reacted angrily, yelling and criticizing Raisor for work she had done earlier on an unrelated matter. Later that afternoon, Raisor returned to Chalmers's office to drop off some documents. When she arrived, Chalmers directed her to step behind an office divider, out of view from the hallway by his office. Chalmers then kissed Raisor on the cheek.

Characterizing this act as "inappropriate, shocking and repulsive," Raisor formally complained to Ralston. Once again, Ralston initiated an investigation into Chalmers's conduct. In an interview with Ralston, Chalmers defended his action as a gesture of apology for his earlier outburst. He equated the kiss to a handshake and attributed his behavior to his "Mediterranean blood." Ralston discussed the situation with Robert Montgomery, Vice President of Human Resources for Quaker's U.S. Grocery Products Division. Montgomery's duties in his division were similar to Ralston's duties in the Corporate Division, and Ralston wanted to ensure that Quaker's policies with respect to sexual harassment and severance were interpreted consistently.

In early September 1992, Ralston and Westbrook decided that Chalmers should be fired. They concluded that the incident with Raisor violated Quaker's sexual harassment policy because it was an uninvited and offensive act of sexual conduct. Though the kiss was sufficient, when combined with earlier findings that Chalmers contributed to an offensive and intimidating environment and the warning issued to him thereafter, Ralston believed that termination was more than justified. Ralston also determined that because Chalmers was being discharged for "gross misconduct," he was not entitled to receive benefits under Quaker's severance program.

Ralston informed Chalmers of his decision verbally on September 11 and in a letter dated September 25. On November 6, 1992, Chalmers appealed the denial of severance benefits to the Committee. Ralston, who typically served on the Committee with Montgomery, recused himself from the appeal because of his role in the investigation and decisionmaking process. Robert Penzkover, Quaker's Director of Employee Benefits, took Ralston's place. The Committee affirmed Ralston's decision on December 2, 1992.

Chalmers appealed the Committee's decision to the district court. Quaker's severance program is a health and welfare fund as defined by ERISA, and therefore the court had jurisdiction. Reviewing the Committee's decision under the arbitrary and capricious standard, the district court could not find reversible error, and it affirmed the denial of severance benefits. 859 F. Supp. 1149 (N.D. Ill. 1994). Claiming ...


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