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Pamela Nelson v. Levy Home Entertainment

February 8, 2012


The opinion of the court was delivered by: Matthew F. Kennelly, District Judge:


Pamela Nelson sued Levy Home Entertainment, LLC, Chas Levy Company, LLC, Carol Kloster, Adam Zoldan, Janet Krey, and Sarah Donaldson in the Circuit Court of Cook County. She asserted a federal employment discrimination claim and state law claims for retaliatory discharge and unjust enrichment against the defendant LLCs (collectively Levy), as well as a state law defamation claim against all defendants. Defendants removed the suit to federal court, and Levy Home Entertainment (LHE) asserted a counterclaim for conversion.

Nelson later voluntarily dismissed her employment discrimination claim. The Court determined to retain jurisdiction over the remaining claims pursuant to 28 U.S.C. § 1367(c) for reasons described in an oral ruling on July 20, 2011.

Defendants have moved for summary judgment on all of Nelson's claims and on LHE's counterclaim. For the reasons stated below, the Court grants defendants' motion in part and denies it in part.


Levy is a wholesale distributer of books that buys from publishers and sells to retailers such as Wal-Mart, Kmart, and Target. Nelson began working for Levy in 1985 and was promoted to Sales Promotions Director in 2002. In this position, she organized and oversaw various events for the retailers and publishers to promote books to the public. Levy's Chairperson, Barbara Kipper, and its CEO, Caroline Kloster, knew Nelson and thought very highly of her work.

In September 2008, however, Levy terminated Nelson. Levy provides the following explanation for its dismissal of Nelson. In early July 2008, Sarah Donaldson, one of Nelson's subordinates, traveled with Erin Padilla, a vice president in another part of the company. During the trip, Donaldson told Padilla that she was concerned about some of Nelson's practices. In particular, Donaldson mentioned that Nelson was spending a lot of money on promotions that did not seem to be creating many additional sales and that she was uncommunicative to her subordinates regarding event costs. Donaldson thought that some of the event spending improperly benefitted Nelson's friends and family. Donaldson also said that Nelson had her subordinates ignore the policies of her boss, John Donohue. Padilla encouraged Donaldson to take this information to Donohue.

After Donaldson reported her concerns to Donohue, he went to his superior, Adam Zoldan. Zoldan reported Nelson's alleged misconduct to CEO Kloster. Kloster assigned Lou Keiler, Levy's general counsel, and Sandy Jubach, Levy's head of human resources, to investigate the allegations against Nelson. Kloster also instructed Donohue and Zoldan to stay out of the investigation, because she was concerned that they were relatively new to the company and might judge a long-term employee like Nelson too harshly.

During their investigation, Jubach and Keiler talked to Nelson's subordinates and looked at her expense reports and records. They did not initially talk to Nelson. Jubach and Keiler found considerable evidence that they believed showed that Nelson was violating Levy policies and misusing company funds. This included information that Nelson had spent large amounts of money improperly at events and had circumvented Levy policies to do so. For example, Nelson had her subordinates pay for business meals that she attended, in violation of company policy, so that Nelson herself, and not her superior, would be the person responsible for approving the expense.

The investigators also determined that Nelson had falsely reported that her subordinates attended some lunches for which she submitted expense reports and that she had invited family and personal acquaintances to other business meals. Perhaps more significantly, Nelson had purchased $8,800 in American Express gift checks and been reimbursed for them by Levy. Gift checks were frequently used by Levy employees who worked at promotional events. The investigators found that Nelson had endorsed more than $7,000 worth of the checks herself and had deposited proceeds directly into her bank account or had used them to purchase personal items.

After CEO Kloster saw the evidence against Nelson, she, Keiler, and Jubach met with Nelson on September 2, 2008 to confront her about the problems with her expenses. Kloster did not believe Nelson's explanations and suspended her without pay, but she gave Nelson ten days to prove that she had properly used all of the gift cards. Levy claims that Nelson had access to her own files during this time, and she provided Kloster documents supporting some of her expenditures and a letter explaining and defending her actions. Kloster found Nelson's explanations unsatisfactory and terminated her after discussing the evidence with chairperson Kipper.

Nelson does not dispute that she made the majority of the expenditures that Kloster found improper. Instead, she offers various explanations for why the expenditures were innocuous, consistent with Levy's practices, or for Levy's benefit. She also contends that Kloster did not actually confront her with the evidence against her and did not provide her a real opportunity to explain herself. In particular, Nelson contends that during the ten days she had to substantiate her expenses, she was not allowed to see her expense reports or the American Express checks and was not allowed access her computer files.

Nelson contends that the investigation into her expenses was no more than a pretext for firing her. She claims that the real reason she was terminated is that she refused her supervisor Donohue's instructions to cheat Levy's clients. One part of Levy's business was to pass promotional incentive money, called co-op money, from publishers to retailers. Nelson claims that some time before August 5, 2008, Donohue instructed her to improperly take co-op money as profit for Levy instead of passing it along to retailers, and she refused. On August 5, Nelson wrote Donohue an e-mail that was primarily a justification of her high spending on promotional events, but that also stated that publishers demanded detailed reports on how Levy spent their promotional dollars, so it was unwise for Levy to make a profit from the promotional money. Nelson claims that she ended the e-mail by saying that she did not want to end up in jail like employees of Advanced Marketing Services (AMS). Donohue had previously worked at AMS, and other executives at the company had been convicted and incarcerated after misusing promotional money from publishers. The copies of the e-mail produced by the parties do not include any references to AMS or jail. Nelson explains this discrepancy by claiming that Levy subsequently altered the e-mail.

Nelson claims that she was fired in retaliation for her refusal to agree to Donohue's improper request. She concedes, however, that she never mentioned Donohue's instructions to anyone else at Levy or to any authorities. In particular, Nelson did not mention the co-op money when writing the letter to Kloster explaining her expenses or in a telephone conversation she had with Kloster and Jubach on September 12, 2008. On September 2, Nelson also forwarded to Keiler her August 5 e-mail to Donohue, but she characterized the e-mail only as an explanation of her lavish promotional spending, and the e-mail she forwarded did not contain any mention of AMS or going to jail.

After Levy terminated Nelson, her former subordinate Renna Thomas heard Janet Krey, another of Nelson's former subordinates, state several times that Nelson was terminated for stealing, was using Levy's money, and was doing things under the table. Nelson also claims that Kloster told Rhonda Rose, a woman who works at the publisher HarperCollins, details regarding Nelson's termination.

Three of Nelson's expense reports from her final months at Levy are also the subject of claims in this suit. One expense report, dated July 30, 2008, stated that Nelson had spent $9,387.55 on Levy's behalf. Levy never reimbursed Nelson for this.

On August 20, Nelson submitted another request for $7,157.71 in expenses she said she had incurred at a Marriott hotel. Levy paid this amount to Nelson. Marriott did not actually bill Nelson, however; instead, it sent a bill directly to Levy. Levy paid Marriott and now seeks to recover the money it paid Nelson. Nelson also submitted an expense report on September 15 after she was terminated, though it was mistakenly dated August 15, seeking reimbursement of $1,870.13. Levy did not reimburse Nelson for this either.


On a motion for summary judgment, the Court "view[s] the record in the light most favorable to the non-moving party and draw[s] all reasonable inferences in that party's favor." Trinity Homes LLC v. Ohio Cas. Ins. Co., 629 F.3d 653, 656 (7th Cir. 2010). Summary judgment is appropriate "if the movant shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law." Fed. R. Civ. P. 56(a). In other words, a court may grant summary judgment "[w]here the record taken as a whole could not lead a rational trier of fact to find for the nonmoving party." Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 587 (1986).

Nelson has made claims of common law retaliatory discharge, retaliatory discharge under the Illinois Whistleblower Act, defamation per se, and unjust enrichment. Defendants seek summary judgment on all four of Nelson's claims and on LHE's conversion counterclaim.

1. Common law retaliatory discharge

Nelson claims that Levy terminated her because she refused to participate in Donohue's improper plan to take co-op money as profit for Levy instead of using it for the benefit of retailers. Although in Illinois employment is usually at will, one exception is that "[a] discharged employee may sue her employer for the common law tort of retaliatory discharge if her discharge was in retaliation for certain actions that are protected by public policy of Illinois." Brandon v. Anesthesia & Pain Mgmt. Assocs., 277 F.3d 936, 940 (7th Cir. 2002).

To prove a common law claim of retaliatory discharge, an employee must demonstrate "that (1) the employer discharged the employee, (2) in retaliation for the employee's activities, and (3) that the discharge violates a clear mandate of public policy." Turner v. Mem'l Med. Ctr., 233 Ill. 2d 494, 500, 911 N.E.2d 369, 374 (2009). One protected activity is "refus[al] to engage in illegal or unsafe activities." Michael v. Precision Alliance Group, LLC, _ Ill. App. 3d _, 952 N.E.2d 682, 687 (2011).

Levy contends that there is no evidence that its personnel who decided to terminate Nelson were aware of her refusal of Donohue's alleged instructions. Levy contends that it terminated Nelson for valid reasons: she had ...

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