Can a business face a class action lawsuit when it has violated a law but may not have actually harmed anyone? And how do you measure whether racial harassment was severe enough for an employer to be liable for creating a hostile work environment?

Those are two questions the U.S. Court of Appeals for the Fourth Circuit addressed recently, and one of its answers may make its way to the U.S. Supreme Court. The rulings in Krakauer v. DISH Network, Evans v. International Paper Co. and Perkins v. International Paper Co. help to clarify the standards that businesses and other employers face with class actions and racial harassment claims, both of which can pose serious consequences for a company's bottom line and public perception.

The Class Action Case

DISH Network continues to fight the $61 million judgment entered against it in a Telephone Consumer Protection Act (TCPA) class action case. Following a unanimous opinion from the Fourth Circuit affirming the judgment, DISH asked the U.S. Supreme Court in October to review the case. DISH's petition to the Supreme Court argues that the Fourth Circuit erred in finding that the class satisfied Article III's requirement of "injury-in-fact." In what the telecom company describes as "a critical legal issue worth huge sums of money," DISH asks: "How can you suffer a concrete injury from a telemarketing call if you never answered the phone, never heard it ring, weren't even aware the call was made, and weren't the phone line subscriber?"

The Fourth Circuit, following the statutory provisions of the TCPA, found a plaintiff has standing to sue when a telemarketer disregards the Do-Not-Call registry and actually places multiple calls to a number listed on the registry. DISH contends that this is not enough and that the Fourth Circuit ignored recent Supreme Court precedent holding statutory violations that do not cause actual injury are insufficient to confer standing. Both at the Fourth Circuit and in its petition to the Supreme Court, DISH relies on Spokeo v. Robins, 2016 a Fair Credit Reporting Act case, where the Supreme Court ruled that plaintiffs must prove "de facto" injury or injury that "actually exists." DISH argues Spokeo holds that Article III does not permit lawsuits to redress statutory violations that cause no actual injury.

The Fourth Circuit agreed that Spokeo governs but rejected DISH's argument that its violations of the TCPA resulted in no harm. Relying on long-standing precedent that protects privacy interests in one's home, the Fourth Circuit described DISH's argument as "nothing more than an attempt to dismember the TCPA, converting a simple remedial scheme into a fact-intensive quarrel over how long a party was on the line or how irritated it felt when the phone rang." The court found that a telemarketer who disregards the Do-Not-Call registry inflicts harm that is "both particular to each person and imposes a concrete burden on his privacy." Thus, it held the plaintiffs established standing.

Noting a split among five circuit courts over how Spokeo applies to a violation of the TCPA, DISH contends this case presents an opportunity for the Supreme Court to address "whether a bare statutory violation creates standing." DISH urges the Supreme Court to follow Salcedo v. Hanna, an Eleventh Circuit decision and the only federal court of appeals decision holding that a TCPA violation, in and of itself, does not establish an injury-in-fact. In doing so, DISH asks the court to reject the opinions and reasoning of the Ninth, Second, Third, and now Fourth Circuit, all of which found that a TCPA violation is sufficient to establish injury-in-fact.

The Racial Harassment Cases

In recent years, the U.S. Court of Appeals for the Fourth Circuit has lowered the bar for plaintiffs to take racial harassment claims to a jury trial when the alleged conduct involved use of racial slurs. However, in separate lawsuits against the same employer decided recently, the Fourth Circuit concluded that both plaintiffs' allegations failed to rise to the level of prohibited harassment. The rulings are important to all employers in the Carolinas, Virginias and Maryland in that they better explain the standard the court is using to determine these claims.

In the first case, Evans v. International Paper Co., plaintiff Deanna Evans was an African-American female who alleged she was subjected to a series of comments and criticisms from white co-workers that resulted in her decision to resign her employment. These incidents included allegations that a supervisor had yelled at her and criticized her work, that she heard co-workers had said they hoped she would not return from maternity leave, and that white co-workers had criticized her hairstyle and behavior. Among the many comments she said she heard about her natural hairstyle, the plaintiff alleged a white co-worker called it "unprofessional" and nicknamed her after a civil rights and Black Panther activist.

The second case, Perkins v. International Paper Co., involved a technician named Matthew Perkins who resigned and contended that he and other African-American employees were subjected to disparate treatment under company work rules, overtime requirements, and low employee rankings. He testified that in departmental rankings, "most of the technicians ranked near the bottom, including himself, were African Americans and females." He also said he "heard second-hand about a white employee making and wearing a KKK hat at work," and that another employee "overheard a white employee, when given a work assignment, complain that he was being asked to work like a n*****."

After Evans resigned and Perkins retired, each filed charges with the South Carolina Human Affairs Commission and the Equal Employment Opportunity Commission. In both cases, a federal district judge in South Carolina granted summary judgment to the employer, and the plaintiffs appealed to the Fourth Circuit.

The Fourth Circuit on August 27 unanimously affirmed the lower court rulings. The court said that even if both plaintiffs demonstrated that they subjectively perceived their environment to be abusive or hostile, this was not enough to allow the claims to proceed to trial: "A plaintiff asserting a combined hostile work environment claim must establish that her working conditions were so intolerable that a reasonable employee would have been compelled to resign," the court wrote in Evans' case. "The conditions, while no doubt frustrating and unpleasant to Evans, cannot, from an objective perspective, be construed to leave her no choice but to resign."

The court noted that Evans herself said in her resignation letter that her time at work had been "on the whole, satisfying and productive" and "a great experience." Those statements combined with the facts that she was promoted and received generally positive evaluations led the court to conclude that the claims collectively failed to rise to the level of a hostile and offensive working environment due to race.

In Perkins' case, the Fourth Circuit again emphasized an objective view of the severity and perverseness of the conduct. Noting that the incidents occurred between 2007 and 2013, the court said, "Those incidents, while no doubt serious to Perkins, from an objective perspective cannot reasonably be described as either frequent, physically threatening or humiliating. Further, Perkins does not allege the incidents interfered with his ability to perform his job."

The court also said the allegations involving second-hand remarks "should not be disregarded simply because he did not witness it." However, it concludes those remarks "are remote in time relative to each other and to Perkins' decision to leave," and therefore not pervasive. The court also stressed that its decision "should not be construed as endorsement of the conduct alleged by Perkins. To the contrary, such alleged conduct is inappropriate. Despite that, it falls short, as a matter of law, of the evidence required."

Takeaways

In the class action case, the Fourth Circuit followed a majority of other circuits who have addressed the issue in holding that telemarketing calls in violation of the TCPA provide standing to sue. Only the Eleventh Circuit has found that establishing Article III standing requires something more than proving a mere violation of the TCPA. Whether the Supreme Court addresses the circuit split remains to be seen. For now, companies that engage in telemarketing must ensure strict compliance with the TCPA to avoid potential liability. Given the Fourth Circuit's sharply-worded opinion, it is possible the Fourth Circuit will see an influx of TCPA cases with plaintiffs seeking similar results.

With the racial harassment cases, the Fourth Circuit applied an objective test in both cases that set a fairly high bar for an employee who quits to claim that they were constructively discharged due to racial harassment. In the absence of direct racial slurs or other degrading conduct aimed at the plaintiff, the employee may be limited to a standard disparate treatment discrimination claim instead of a harassment claim, especially when the employee leaves work (as opposed to being fired) due to the alleged impact of such treatment on him or her. Employers in the Carolinas, the Virginias, and Maryland should not read these decisions as a wholesale reversal of the Fourth Circuit's drift toward a more liberal definition of harassing behavior. At most, these cases set a baseline from which conduct can be compared in order to determine if it exceeds the indirect effects shown here on the plaintiffs and their decisions to leave work.

Jonathan Crotty, Melanie Dubis and Robert Osborne are attorneys at Parker Poe. Jonathan leads Parker Poe's Employment & Labor Team. Melanie leads the firm's Business Litigation Team, which Robert is a part of.