Federal Court Grants Summary Judgment in Racial Discrimination Case Involving FINRA BrokerCheck

February 8, 2021

A recent racial discrimination case filed in federal court prompted a defendant's motion for summary judgment. In and of itself, that procedural response is not uncommon, but the court's granting of the motion was predicated, in part, upon the alleged non-disclosure of a continuing employment history on FINRA's BrokerCheck database. The Plaintiff employee allegedly disclosed that his employment had purportedly ended in 2014 but it appears to have persisted until 2018. It takes a while to digest that. Making matters even more odd, the former employer was not a FINRA member firm and the termination did not involve any securities transactions. How did BrokerCheck come into play? Ahh, now that's quite the story!

Tapley Files Racial Discrimination Complaint

Plaintiff Robert B. Tapley filed a Complaint in the United States District Court for the Northern District of Texas ("NDTX") alleging that his former employer, Defendant Simplifile, LC, had racially discriminated against him. Pending before the Court was Defendant's Partial Motion for Summary Judgment. Robert B. Tapley, Plaintiff, v. Simplifile, LC, Defendant (Memorandum Opinion and Order, United States District Court for the Northern District of Texas, 19-CV-00227)

Rather than try to summarize an otherwise complex and nuanced fact pattern, I publish below an extensive extract to ensure that the history of events is accurately depicted [Ed: footnote omitted]:

In this action, Tapley, an African American, asserts a claims for race discrimination under 42 U.S.C. § 1981 against his former employer Simplifile, LC (Simplifile) based on its decisions to (1) include him in a reduction in force (RIF) of sales personnel and (2) revoke its offer of a severance agreement and payment after learning that he had been operating an insurance business during his employment. Simplifile moves for summary judgment on Tapley's section 1981 claim, contending he has no evidence to show that either his inclusion in the RIF or the decision to revoke the severance offer was a pretext for race discrimination. Simplifile also asserts there is no evidence that any similarly-situated non-African-American employees received more favorable treatment with respect to its decision to revoke Tapley's severance offer. 

The summary judgment evidence shows that Simplifile connects private businesses with governmental agencies to enable and simplify the electronic filing of legal and other documents involved in real estate transactions (Doc. 42, p. 5). In 2009, Simplifile President Paul Clifford hired Tapley to be Regional Sales Director for Texas; Louisiana later was added to Tapley's territory (Id., pp. 5-6, 38). As sales director, Tapley sold Simplifile products to real estate submitters and sold/assisted counties in signing up to use Simplifile's systems (Id., p. 37). 

Starting in 2016, Simplifile required its employees, including Tapley, to enter into a Confidentiality, Non-Solicitation and Non-Compete Agreement (Confidentiality Agreement) in order to better protect its confidential information (Id., pp. 6, 28-35, 92-93). Under the Confidentiality Agreement, which was "material consideration" for his continued at-will employment, Tapley agreed not to enter into any oral or written agreement that conflicted with the performance of his full-time job with Simplifile and to provide written notification if he intended to engage in certain activities, including, but not limited to, owning or operating another business, "regardless of the type of business or time commitment required" (Id., pp. 30, 95). The Confidentiality Agreement provided that it represented their entire agreement on the subjects therein and could not be modified except by a written agreement that referred to the Confidentiality Agreement and was signed by both parties (Id., pp. 31-32). 

Initially, Simplifile's Texas sales were strong but, after time, sales growth slowed (Id., p. 7). In mid-2018, a review of sales data, projections, and conversations with various sales directors, including Tapley, caused Vicki DiPasquale, Simplifile Vice President of Sales, to believe Simplifile was overstaffed in the sales director position (Id., p. 39). In late 2018, Clifford, DiPasquale, and Auri Burnham, Simplifile's Vice President of Finance and Accounting, determined to reduce sales director positions by three (Doc. 42, pp. 8, 39). DiPasquale then analyzed historical sales data and interviewed each sales director regarding future growth opportunities in their states (Id., pp. 8, 39-40). During that process, Tapley told DiPasquale that he believed future growth in Texas was likely limited and, specifically, that growth percentages were probably going to be flat or not grow as quickly or at the same percentages as years past (Id., pp. 39-40, 88, 161, 168). Based on Simplifile sales data and sales director feedback about future growth opportunities, DiPasquale recommended that the sales director positions held by Tapley, Randy Wilkey, and Melanie Gornick be eliminated, and Clifford and Burnham agreed with her recommendation (Id., p. 7). 

In November 2018, Tapley, Wilkey, and Gornick were laid off pursuant to the RIF, and sales opportunities in their territories were redistributed to other, remaining sales directors (Id., pp. 7, 41-42, 84, 88-89, 96; Doc. 45, pp. 130-131). They were offered a separation package in exchange for a release of claims (Id., pp. 7-8). Tapley accepted the package and agreed to release any claims, including, but not limited to, claims for race discrimination, against Simplifile (Id., pp. 97-98, 131-136). Tapley further agreed that nothing in his release changed or limited the rights or obligations under the Confidentiality Agreement (Id., pp. 98, 134). 

Shortly thereafter, Jeff Pettine, who added Texas to his territory, mentioned to another sales director, John Riddell, that a number of leads in Texas had not been pursued and Simplifile was behind on the number of counties enrolled (Id., pp. 176, 180). Pettine wondered what Tapley had been doing (Id.). After their discussion, Riddell ran a Google search, which showed Tapley owned and was the managing member of an Allstate Insurance agency, the "Tapley Group," formed in 2014 (Id., pp. 41-42, 56, 176-177). Another website showing Tapley's involvement in a "businessman's" group appeared to omit Tapley's nine-year employment with Simplifile, but listed his other employment (Doc. 42, p. 177). Riddell forwarded the website links to DiPasquale (Id., pp. 56, 177). 

DiPasquale reviewed the information and confirmed that Tapley appeared to own an Allstate agency, which bore his name, had a physical office location with employees, and was open during normal business hours (Id., pp. 41-42, 53, 58-60). DiPasquale forwarded the information to Clifford and others at Simplifile (Id.) She and Clifford also viewed a publicly-available report on "Brokercheck," a Financial Industry Regulatory Authority (FINRA) website, which misrepresented, under penalty of perjury, that Tapley had not been employed with Simplifile since 2014 (Id., pp. 8-9, 42, 63-69, 98-99, 101, 104, 163). Tapley never told DiPasquale that he owned and operated an insurance business or provided notice of it in writing as required by the Confidentiality Agreement (Id., pp. 41-42, 56). After considering this information, Simplifile determined Tapley had breached the Confidentiality Agreement and notified Tapley that the termination of his employment was being re-classified as "for cause" and, as a result, he was not eligible for severance pay (Doc. 42, pp. 43, 62-69, 139, 163). According to Clifford and DiPasquale, had Simplifile been aware that Tapley owned and was operating an entirely separate business while working for Simplifile, in breach of the Confidentiality Agreement, his employment would have been terminated (Id., pp. 8, 41-42). 

at Pages 1 - 4 of the NDTX Opinion

SIDE BAR: 42 U.S. Code § 1981: Equal rights under the law

(a) Statement of equal rights
All persons within the jurisdiction of the United States shall have the same right in every State and Territory to make and enforce contracts, to sue, be parties, give evidence, and to the full and equal benefit of all laws and proceedings for the security of persons and property as is enjoyed by white citizens, and shall be subject to like punishment, pains, penalties, taxes, licenses, and exactions of every kind, and to no other.

(b) "Make and enforce contracts" defined
For purposes of this section, the term "make and enforce contracts" includes the making, performance, modification, and termination of contracts, and the enjoyment of all benefits, privileges, terms, and conditions of the contractual relationship.

(c) Protection against impairment
The rights protected by this section are protected against impairment by nongovernmental discrimination and impairment under color of State law.

Four-Part Discrimination Test

In initially tackling Defendant Simplifile's Motion for Summary Judgment, NDTX notes that Plaintiff Tapley must present evidence of each of the four elements of racial discrimination:

(1) he was in a protected class; (2) he was qualified for the position; (3) he suffered an adverse employment action; and (4) he was replaced by a person outside of his protected class or was otherwise treated less favorably than similarly situated employees.. . .

at Page 7 of the NDTX Opinion

If the Plaintiff establishes the prima facie elements, the burden of proof then shifts to the employer to present legitimate, nondiscriminatory reasons for the adverse employment action; and, at that point, the burden shifts yet again back to the Plaintiff to prove that the employer's reasons are merely pretextual. 

The RIF Not Pretext

NDTX found that the RIF was a legitimate, non-discriminatory reason for Tapley termination because the employer sought to reduce its salesforce in states where it had a good-faith belief of limited growth prospect. Moreover, the Court also found that:

Further, Clifford, who hired Tapley, also made the decision, along with DiPasquale and Burnham, to terminate Tapley (Id., pp. 6-7), and, where the same decisionmaker is involved in both the hiring and termination decisions, a presumption arises that discriminatory animus is not present. 

at Page 8 of the NDTX Opinion

A Shifted Burden

Having accepted that the RIF was not pretextual, the Court then viewed the burden as shifted to Tapley to now prove that the RIF was, in fact, pretextual and "but for his race, he would not have been terminate." at Page 8 of the NDTX Opinion. Although Tapley disagreed with Simplifile's criterion upon which he purportedly opted to resort to the RIF, the Court did not see any "evidence to show that race motivated Simplifile's decision to include him in the RIF." at Pate 8 of the NDTX Opinion. In reviewing both what Tapley argued and resorting to a significant amount of inference, the Court concludes that:

Tapley's personal, subjective belief that he suffered discrimination simply is not sufficient to raise a reasonable inference of pretext. See, e.g., Grimes v. Texas Dep't of Mental Health & Mental Retardation, 102 F.3d 137, 141, 143 (5th Cir. 1996) (affirming district court's finding that plaintiff's "subjective belief that she was being discriminated against . . . on the basis of her race was not enough"); Banda v. Owens Corning Corp., No. 3:17-cv-1787-B, 2018 WL 6726542, at *10 (N.D. Tex. Dec. 21, 2018) (plaintiff's "conclusory allegations and subjective belief are insufficient to show that his race/national origin played any role, much less lay at the heart of, Defendant's termination decision to satisfy a finding of pretext); McCullar v. Methodist Hosp. of Dallas, No. 3:10-cv-1895-K, 2012 WL 760074, at *15 (N.D. Tex. Mar. 8, 2012). On this record, the Court finds there is no evidence that Simplifile's RIF, and Tapley's inclusion in it, was a pretext for race discrimination and, therefore, Simplifile is entitled to summary judgment on Tapley's section 1981 claim related to his termination. 

at Page 11 of the NDTX Opinion

Belief Versus Proof

As to Tapley's allegations that non-African-Americans Wilkey and Gornick:
  • owned/operated a second business;
  • failed to notify Simplifile and failed to obtain the company's approval about the second business; and
  • were not discharged, 
NDTX again found that Tapley had not presented any evidence presented supporting his beliefs. Moreover, the Court found that:

[I]nstead, the evidence shows, that, after Simplifile offered Tapley the severance pursuant to a separation agreement, DiPasquale learned that Tapley had owned and operated another business --  one with a physical office and employees  -- for years with [sic -- likely should be "without"] notifying Simplifile, in writing or otherwise, as required by the Confidentiality Agreement. And, Tapley's "Brokercheck" report misrepresented that his employment with Simplifile had ended in 2014, the same year he became affiliated with his new insurance business. Based on the information that Tapley had been working a second job, Clifford and DiPasquale believed that Tapley had deceived them, had not focused his business efforts on his job, and breached the Confidentiality Agreement. As a result, they decided to convert his termination to one for cause and withdraw the severance offer (Doc. 42, pp. 8-9, 42, 95). The Court finds Simplifile's reason for withdrawing the severance offer was a legitimate, non-discriminatory reason.  . . . 

at Pages 12 - 13 of the NDTX Opinion

SIDE BAR: FINRA's online BrokerCheck discloses as of February 8, 2021 that Tapley's "Registration History" included registration from May 2006 to August 2007 and, thereafter, since March 30, 2016, with Allstate Financial Services, LLC. Additionally, BrokerCheck discloses this "Employment History":
  • August 2014 to present: Allstate Insurance Co. as an agent;
  • June 2014 to present: The Tapley Group as agency owner; and
  • April 2009 to November 2018: Simplifile as a regional sales director.

Motion Granted

Having found that Tapley had not made out a prima facie case for discrimination, NDTX granted Simplifile's Motion for Summary Judgment and dismissed Tapley's Section 1981 claims with prejudice.

Bill Singer's Comment

The NDTX Opinion asserts that at one time, Tapley's employment with Simplifile was disclosed on BrokerCheck as having ended in 2014, which was allegedly false. As currently set forth on FINRA's online database, Tapley's employment with Simplifile is disclosed as having occurred from April 2009 to November 2018. The cited 2014 end-date appears to have been an important factor in persuading NDTX to grant summary judgment on the Section 1981 claim. Although Simplifile was not a FINRA member firm and none of the substantive allegations involve securities-related conduct or customers, BrokerCheck still played a critical role in this case. 

As Tapley makes abundantly clear, so-called "after acquired evidence" may provide a former employer with proof that a former employee would have been fired or should be denied severance; however, such after-acquired-evidence  can't be an alternative theory.  After-acquired-evidence must demonstrate the "absence" of a wrongful, discrimination motive for termination -- it can't demonstrate "in addition to."  NDTX seems persuaded that not only was Tapley discharged pursuant to a non-discriminatory RIF, but, he could have/would have been discharged for his nondisclosure of his an insurance business, and, further, the employer did not have to honor its severance agreement.