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Scarborough v. Federated Mutual Insurance Co.

United States District Court, D. Minnesota

February 1, 2017

Jonathan Scarborough, Plaintiff,
Federated Mutual Insurance Company, Defendant.

          David H. Redden, Esq., and John A. Fabain, Esq., Fabian May & Anderson PLLP, counsel for Plaintiff.

          Britt M. Gilbertson, Esq., Danielle W. Fitzsimmons, Esq., and Gregory J. Stenmoe, Esq., Briggs & Morgan, PA, counsel for Defendant.


          DONOVAN W. FRANK United States District Judge


         This matter is before the Court on a Motion for Summary Judgment brought by Defendant Federated Mutual Insurance Company (generally, “Federated”). (Doc. No. 77.) Plaintiff Jonathan Scarborough filed a claim against Federated alleging that he was terminated in violation of Minnesota's Whistleblower Act (“MWA”), Minnesota Statute §§ 181.931-.932. Additionally, Federated moves for summary judgment for its counterclaim for breach of a forum selection clause. For the reasons set forth below, the Court grants the motion in part.


         Until recently, Scarborough was a Regional Marketing Manager (“RMM”) for Federated. (Doc. No. 84 (“Redden Decl.”) ¶ 3, Ex. 1. (“Scarborough Dep.”) at 12; Redden Decl. ¶ 3, Ex. 2 (“Kerr Dep.”) at 23.) He had held that position since 2012. (Id.) Scarborough supervised six District Marketing Managers (“DMM”). (Doc. No. 85 (“Scarborough Decl.”) ¶ 2.) Scarborough's role as RMM included reviewing and approving DMMs' expense reports. (Doc No. 80 (“Fitzsimmons Aff.”) ¶ 2, Ex. 15.)

         One of Scarborough's DMMs was Frederick Johnston. (Scarborough Dep. 46.) On July 1, 2014, Johnston's assistant submitted Johnston's expense report for his company credit card. (Fitzsimmons Aff. ¶ 2, Ex. 16.) The report included a personal expense for custom framing. (Id.) The next day, the Marketing Administration Manager Rhonda Kath e-mailed Johnston about the framing expense. (Redden Decl. ¶ 2, Ex. 7 (“Kath Dep.”) at 28.) Johnston lied to Kath about the expense, claiming that it was for laminating services or printer ink. (Id. at 25.) Unconvinced, Kath inquired directly with the store and learned that the expense was for framing pictures of Johnston's European vacation. (Id. at 35.)

         With the lie rooted out, Kath e-mailed her supervisor, who brought in Scarborough's supervisor Michael Pennington. (Fitzsimmons Aff. ¶ 2, Exs. 18 & 19.) Pennington then updated Scarborough. (Fitzsimmons Aff. ¶ 2, Ex. 19.) When Pennington and Scarborough spoke about Johnston's frame expense, Scarborough mentioned that Johnston liked expensive things, including that, “Johnston liked to hold meetings at the law offices of Husch Blackwell, even though he could probably find a less expensive venue to hold the meetings.” (Doc. No. 38 (“Second Amended Compl.”) ¶ 10.) Pennington replied, “What are you talking about? [Johnston] gets those meeting rooms for free.” (Scarborough Dep. at 69.) Scarborough explained that Johnston had been submitting invoices for those meetings. (Id.) Their conversation ended with Scarborough telling Pennington that he would investigate the issue further. (Id. at 52.)

         On July 14, 2014, Scarborough exchanged e-mails with Husch Blackwell, which confirmed that the meetings were free. (Fitzsimmons Aff. ¶ 2, Ex. 21.) Scarborough forwarded the e-mails to Pennington, and they agreed to talk with Johnston about the invoices in addition to the framing expense. (Id.)

         On July 21, 2014, Scarborough and Pennington met with Johnston. (Scarborough Dep. at 87-88; Redden Decl. ¶ 3, Ex. 3 (“Pennington Dep.”) at 109.) Prior to the meeting, Pennington asked if Scarborough had prior knowledge about the false invoices, and Scarborough denied it. (See Fitzsimmons Aff. ¶ 2, Ex. 27.) In the meeting, Johnston admitted to everything-to the falsified invoices and to the custom framing. (Pennington Dep. at 109-110.) Later that day, Johnston called Pennington to tell him that Scarborough had known about Johnston's scheme “from the very beginning” and that Scarborough had convinced Braxton Weaver to do the same thing. (Fitzsimmons Aff. ¶ 2, Ex. 27; Redden Decl. ¶ 3, Ex. 5 (“Johnston Dep.”) at 170-72.) Federated would later determine that Johnston had expensed Husch Blackwell meetings since July 2012, including a few invoices that occurred before Scarborough began supervising Johnston. (See Pennington Dep. at 60-61.)

         On July 24, 2014, Scarborough met with Pennington and Pennington's supervisor Mike Kerr. (Fitzsimmons Aff. ¶ 2, Ex. 27.) At the July 24 meeting, Kerr asked Scarborough about whether he had prior knowledge of Johnston's invoicing practice. Again, Scarborough denied having any prior knowledge. (Id.)

         Pennington and Kerr continued to investigate whether other DMMs had also falsified invoices. Pennington spoke with Weaver on July 24, 2014. (Pennington Dep. at 135.) Weaver apparently confirmed that Scarborough had told Weaver to contact Johnston about falsifying invoices. (Redden Decl. ¶ 3, Ex. 6 (“Weaver Dep.”) at 61.) Then Weaver repeated that Scarborough knew about the fraudulent scheme in a later meeting with both Kerr and Pennington. (Kerr Dep. 56-57; Weaver Dep. 67-71.)

         On July 30, 2014, Scarborough met again with Kerr and Pennington. (Kerr Dep. at 70.) At the meeting, Scarborough allegedly told Pennington and Kerr that Federated likely violated tax laws because it had not applied the proper withholdings to the funds that Johnston had taken. (Doc. No. 83 (“Pl.'s Opp.”) at 12; Scarborough Decl. ¶ 10.) Neither Kerr nor Pennington remembers Scarborough bringing up tax violations or other illegalities related to Johnston's false invoices. (Kerr Dep. at 86; Pennington Dep. at 165-66.)

         On August 4, 2014, Pennington, Scarborough, and Johnston met. (Scarborough Dep. at 110.) At this point, Pennington wanted to keep Johnston at Federated, while Scarborough wanted Johnston fired. (Scarborough Decl. ¶ 3.) Instead, Johnston was offered a choice of resigning or being demoted. (Fitzsimmons Aff. ¶ 2, Ex. 28.) After Johnston left the meeting, Pennington issued a warning letter to Scarborough because Scarborough continued to deny his prior knowledge of Johnston's fraudulent scheme. (Fitzsimmons Aff. ¶ 2, Ex. 29.)

         After the August 4 warning letter, from Federated's perspective, Scarborough was on thin ice. (Id. (“[A]ny future misconduct will likely result in the termination of your employment with Federated.”).) And by August 20, 2014, Federated would demote and then ultimately fire Scarborough. What happened between August 4 and August 20 depends on the party you ask. According to Scarborough, Pennington manufactured evidence to create grounds to have Scarborough fired. (Doc. No. 79 (“Def.'s Memo.”) at 13-18.) According to Federated, after August 4, it learned that ...

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