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Scarborough v. Federated Mutual Insurance Co.

United States District Court, D. Minnesota

March 29, 2019

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

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

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




         This matter is before the Court on a Motion for Summary Judgment brought by Defendant Federated Mutual Insurance Company (generally, “Federated”). (Doc. No. 123.) 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. For the reasons set forth below, the Court grants Federated's motion.


         I. Factual Background

         The facts of this case were previously set forth in an Order dated February 1, 2017. (Doc. No. 88.) In that Order, the Court granted Federated summary judgment on Scarborough's MWA claim. Plaintiff appealed and the Eighth Circuit Court of Appeals vacated and remanded the case for reconsideration in light of the Minnesota Supreme Court's decision in Friedlander v. Edwards Lifescis., LLC, 900 N.W.2d 162, 166 (Minn. 2017). (Doc. No. 113.)

         Federated is a national mutual insurance company that offers insurance primarily to businesses and business owners. Scarborough was a Regional Marketing Manager (“RMM”) for Federated for the Central Region, which includes Kansas, Missouri, and Nebraska. (Doc. No. 126 (“Fitzsimmons Decl.”) ¶ 3, Ex. 1. (“Scarborough Dep.”) at 12; id. ¶ 3, Ex. 9.) He had held that position since 2012. Scarborough supervised six District Marketing Managers (“DMM”) and his role as RMM included reviewing and approving DMMs' expense accounts. (Id. ¶ 3, Ex. 10, ¶ 16.)

         One of Scarborough's DMMs was Frederick Johnston. On July 1, 2014, Johnston's assistant submitted Johnston's expense report for his company credit card. (Id. ¶ 3, Ex. 16.) The report included a personal expense for custom framing. (Id. ¶ 3, Ex. 15.) The next day, the Marketing Administration Manager Rhonda Kath e-mailed Johnston about the framing expense. (Id. ¶ 3, Ex. 15; id. ¶ 3, Ex. 4 (“Kath Dep.”) at 28.) Johnston lied to Kath about the expense, claiming that it was for laminating services and printer ink. (Fitzsimmons Decl. ¶ 3, Ex. 15; Kath Dep. at 25-26.) Unconvinced, Kath inquired directly with the store and learned that the expense was for framing pictures of Johnston's European vacation. (Fitzsimmons Decl. ¶ 3, Ex. 15; Kath Dep. at 35.)

         With the lie rooted out, Kath e-mailed her supervisor and General Manager-Marketing Services, Martha Kearin, who brought in Scarborough's supervisor Michael Pennington. (Fitzsimmons Decl. ¶ 3, Ex. 17.) Pennington then updated Scarborough. (Id. ¶ 3, Ex. 18.) On July 7, 2014, Pennington and Scarborough met to discuss Johnston's expenses. During this meeting, Scarborough mentioned that Johnston liked “nice and fancy” things and added by way of example that Johnston liked to hold meetings at the law offices of Husch Blackwell, even though he could probably find a less expensive venue. (Scarborough Dep. at 68-69.) After hearing that, Pennington replied, “What are you talking about? [Johnston] gets those meeting rooms for free.” (Id.) Scarborough then 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, 69.)

         On July 14, 2014, Scarborough exchanged e-mails with Husch Blackwell, which confirmed that the meeting rooms were provided free of charge. (Fitzsimmons Decl. ¶ 3, Ex. 20.) Scarborough forwarded the e-mails to Pennington, and they agreed to talk with Johnston about the invoices in addition to the framing expense. (Id.)

         Kearin continued her investigation into Johnston's expense reports from July 2012 to July 2014, along with invoices Johnston submitted to support his out-of-pocket expenses. (Id. ¶ 3, Ex. 22.) She forwarded the reports and invoices to Pennington, who forwarded them to Scarborough. (Id. ¶ 3, Exs. 23-24.) Her report showed that Johnston had submitted, and Scarborough had approved, over $5, 000 in out-of-pocket expenses related to the Husch Blackwell meeting rooms in amounts ranging from $250 to $350 per meeting. (Id. ¶ 3, Exs. 24-25; Scarborough Dep. at 82-84.)

         On July 21, 2014, Scarborough and Pennington met with Johnston. (Scarborough Dep. at 87-88; Fitzsimmons Decl. ¶ 3, Ex. 2 (“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 Decl. ¶ 3, Ex. 26.) During the meeting, Johnston admitted to submitting fraudulent invoices and receiving payment for them. (Pennington Dep. at 109-111.) Later that day, Johnston called Pennington to tell him that Scarborough had known about Johnston's scheme and that Scarborough had suggested to another DMM, Braxton Weaver, that he do the same thing. (Fitzsimmons Decl. ¶ 3, Ex. 26; id. ¶ 3, Ex. 5 (“Johnston Dep.”) at 170-72.)

         On July 24, 2014, Scarborough met with Pennington and Pennington's supervisor, Mike Kerr. (Fitzsimmons Decl. ¶ 3, Ex. 26.) At the July 24 meeting, Kerr asked Scarborough whether he had prior knowledge of Johnston's invoicing practice. Again, Scarborough “aggressively” denied having any prior knowledge. (Id.)

         Pennington and Kerr continued to investigate whether other DMMs had also falsified invoices. For example, Pennington reached out to Weaver to follow up on the claim that Scarborough knew about Johnston's fraudulent expenses and recommended the practice to other DMM's. (Id. ¶ 3, Ex. 26; id. ¶ 3, Ex. 7 (“Weaver Dep.”) at 45-48.) When asked if Scarborough, Weaver's supervisor, was aware that Johnston was submitting false Husch Blackwell invoices, Weaver responded “yes.” (Weaver Dep. at 45-47, 52-53.) Weaver also answered “yes” when asked if he told Pennington that Scarborough recommended to him that he contact Johnston for “more details on how to do the same with respect to submitting fraudulent practices as an avenue to pocket money.” (Id. at 61.)

         On July 30, 2014, Scarborough met with Kerr and Pennington. (Fitzsimmons Decl. ¶ 3, Ex. 3 (“Kerr Dep.”) at 70; Scarborough Dep. at 55.) At this meeting, Scarborough stated that Johnston's actions may have been illegal. Scarborough also allegedly told Pennington and Kerr that he suspected that Johnston was violating tax law and that Federated likely violated tax laws because it had not applied the proper withholdings to the funds that Johnston had taken. (Scarborough Dep. at 60.) Kerr and Pennington either deny or do not remember that Scarborough brought up tax violations or other illegalities related to Johnston's false invoices. (Kerr Dep. at 86; Pennington Dep. at 165-66.) In addition, at the meeting, Kerr confronted Scarborough about his failure to use the company's travel team when scheduling work travel and Scarborough's alleged misuse of referral credits on a company cruise. (Scarborough Dep. at 55-58.)

         On August 4, 2014, Pennington, Scarborough, and Johnston met in Kansas City. (Id. at 110; Pennington Dep. at 200, 206-07.) Pennington explained that due to the findings regarding Johnston's unethical practices, he could not continue in management at Federated. Ultimately, Johnston was offered a choice of resigning or being demoted. After Johnston left the meeting, Pennington then issued a warning letter to Scarborough because Scarborough continued to deny his prior knowledge of Johnston's fraudulent scheme. The letter read in part:

Based upon conversations you and I had many months prior to this matter arising, as well as other information I have received during the investigation, I find that your abject denials lack credibility and that you were not honest with Mike and me - even though we allowed you multiple ...

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