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May 6, 1997

DEREK E. DAVIS, Plaintiff,

The opinion of the court was delivered by: SIMANDLE

 JEROME B. SIMANDLE, District Judge:

 After two days of trial without a jury, concluding on January 8, 1997, the court has considered all testimony *fn1" and exhibits *fn2" and arguments of counsel and deliberated to a Verdict. For the reasons stated in these Findings of Fact and Conclusions of Law, which are hereby entered under Rule 50, Fed. R. Civ. P., the Court finds that plaintiff Derek Davis has proved, by a preponderance of the credible evidence, that race was a motivating factor in defendant's decision to terminate his employment. As a remedy, the Court will award back pay and require defendant to reinstate Mr. Davis to the claims examiner position forthwith.


 Derek Davis, an African American male born on February 18, 1958, graduated from Virginia State University in Petersburg, Virginia with a B.S. Degree in Business Administration in December, 1981. He returned home to New Jersey and sought employment in the insurance industry. He was hired by Allstate Insurance as a claims trainee in October, 1982, and was promoted to claims representative in the bodily injury department. He left Allstate in December, 1985, to accept the job offer of defendant Rutgers Casualty Insurance Co., because he believed prospects for career advancement would be better in the smaller company.

 At Rutgers Casualty, Davis was hired by Vice President Charles Lisby and Claims Supervisor Linda Spruill, both of whom are African American. His first position for Rutgers was as Bodily Injury Claim Examiner, at a salary of $ 23,000 per year starting in December, 1985. (Tr. 135.) His work as a claims examiner was highly regarded within the company, according to Claims Supervisor Linda Spruill (Tr. 57-59) and President Brian Hollander. (Tr. 255.) Davis became a "team leader" among the bodily injury claims adjusters. (Tr. 57.)

 Meanwhile, by 1988 Rutgers Casualty, under its prior ownership, was having financial difficulties. Nacham Stein was part of a group called the American European Group that had assembled capital and was looking to buy a company as an investment. (Tr. 242-244.) Stein asked Brian Hollander to locate a company he could buy. (Tr. 242.) Stein had been introduced to Hollander through an American European Group board member who knew Hollander when Hollander served as a governmental affairs representative of the Aetna Insurance Company in Washington, D.C., in the 1980's. (Tr. 238, 242.) Mr. Hollander, a lawyer with a substantial background from the 1960's in community legal services and thereafter as a litigating lawyer with one of New England's largest law firms, and who also has worked 7 1/2 years with Aetna at a policymaking headquarters level (Tr. 236-242), had become a private entrepreneur and he accepted the task of locating a company for Mr. Stein.

 Mr. Milton Kligler was selected to perform this role, as a person with a long insurance background who was said to have been instrumental in turning around other failing insurance companies. (Tr. 245.) Kligler was paid directly by Rutgers Casualty.

 In late 1988, the sale was consummated. Nacham Stein became the owner, Brian Hollander became the President (replacing outgoing president Robert Lipkin after a few months), and Milton Kligler worked closely with Hollander to help decide what needed to be done to improve Rutgers' financial performance. (Tr. 245-247.)

 The Hollander-Kligler management team brought about organizational changes. Discrete responsibilities were assigned to four departments -- Claims, Underwriting, Administrative Functions (Accounting), and Marketing. The Claims Department was placed under the supervision of Linda Spruill, and the former Vice President for Claims, Charles Lisby, was demoted to claims examiner under Spruill, with no decrease in salary. Three Claims Department sub-units were established -- Property Damage, PIP, and Bodily Injury [BI] -- to process the different types of claims the company received. (Tr. 248-251.)

 Plaintiff Derek Davis was selected as the supervisor of the PIP Unit in June, 1989 (Tr. 53, 135), when Jim McAttee became supervisor of the Property Damage Unit and Roseann Coyle became supervisor of Bodily Injury. (Tr. 253, 310). McAtee and Coyle are Caucasian. Davis, McAtee and Coyle reported to Spruill, who reported to Hollander. Spruill, as noted, is an African American, and Hollander is a Caucasian.

 The PIP Unit was new, and Davis was the first PIP Supervisor. The PIP Unit was responsible for receiving, evaluating and paying first-party claims by Rutgers' insureds for Personal Injury Protection, which under the law of New Jersey provides for payment of an insured's income loss and reasonable and necessary medical expenses incurred in treatment of personal injuries sustained in automobile accidents without respect to fault. Derek Davis was selected collectively by Hollander and Spruill (Tr. 77-78) because there was "a sense that . . . he was someone who could do the job," according to Hollander. (Tr. 255.) He had received favorable evaluations as a team leader in his claims examiner role (Pl. Ex. B and Tr. 57-59).

 The PIP Unit received a deluge of files, both new and old. When Davis took over, there were about 1,500 - 1,600 old PIP claims pending, plus new PIP claims arriving every day, according to Linda Spruill's recollection (Tr. 56), while Davis recalls upwards of 1,800 claims initially pending. (Tr. 136-37.) The disparity in even identifying the initial PIP caseload is not surprising, because the PIP files were in disarray when Davis took over, and one of the first tasks was to organize and catalog the backlog. Under Davis' supervision, the caseload was cut to under 1,000 PIP files during his 18-month tenure. (Tr. 138.) Davis was not given a job description (Tr. 139), and Hollander never told Davis or Spruill that Davis' job was in jeopardy. (Tr. 65, 143, 146, 262, 267.)

 According to his supervisor, Ms. Spruill, Davis' duties as PIP supervisor included instructing others in proper procedures, signing checks within his authority, and approving PIP payments, while supervising the work of the 3 or 4 claims examiners in his unit. (Tr. 54.) Davis implemented new procedures, such as systematic scheduling of independent medical exams (IME's) of PIP claimants after 90 days of treatment (Tr. 140).

 Davis received a supervisor evaluation as PIP supervisor on December 31, 1989. (Tr. 59-61, Ex. B.) His attendance was "excellent," he "can be relied on to always follow through," and his attitude was "enthusiastic, cooperative and friendly," according to that evaluation signed by Ms. Spruill. She also testified that she had no problems with his performance, and that she never told Hollander or Kligler that Davis was causing any problems as supervisor. (Tr. 62, 74-75.)

 Davis's salary as PIP supervisor was increased from $ 34,500 to $ 39,000 in 1990. (Tr. 61, 160.) As PIP unit supervisor, Davis occupied a "hot seat," because the unit was always under scrutiny to perform. (Tr. 312.) Davis' PIP job was detail-oriented and the most intense and complicated, day-to-day, according to Hollander. (Tr. 285.) There were periodic meetings among Hollander, Kligler, Spruill, Davis, McAtee and Coyle, perhaps on a weekly or bi-weekly basis, in which the various claims units' files were discussed. (Tr. 311.) Hollander and Kligler would "tear apart" the various files, both from PIP and Bodily Injury, at these meetings (Tr. 314), according to Ms. Coyle's testimony. Hollander, too, recalls looking at PIP files "all the time" and discussing them at these meetings at which Spruill and Davis were present. (Tr. 258-59.) Although the PIP files were criticized, there is no credible testimony that Hollander or Kligler criticized Davis' supervisory performance itself, such as by directing him to spend more time or be more careful. That occasional lapses occurred -- such as paying a bill that should not have been paid, or failing to set up a medical exam at the appointed time -- was inevitable in the nature of the business of processing a multitude of PIP claims. In fact, under Davis, the incidence of such PIP unit mistakes decreased over time, because Davis was concerned and took corrective action. (Tr. 108.)

 One of the participants in the meetings, Roseann Coyle, has worked as supervisor of the Bodily Injury Unit for seven years. (Tr. 310.) She recalled that Kligler seemed to be especially harsh toward Davis when reviewing files, and Kligler's attitude toward Davis seemed to her to have a racist edge. (Tr. 354.) Kligler would go through Davis' desk and files at night, but did not go through the desks and files of white managers. (Tr. 354.) Coyle and Davis shared a large cubicle containing their work stations, and Coyle would often hear Kligler say hello to others by name but say to Davis, "How are you doing, Boy?" (Tr. 355.) Coyle found Kligler's attitude offensive and absurd. (Tr. 355.) Coyle testified that Kligler had uttered a derogatory statement about African Americans to her on an unrelated occasion in 1992 that confirmed her hunch that Kligler had racist views. When Coyle was late for a meeting in Newark with Kligler, she explained she had gotten lost driving and ended up going through some terrible slums in Newark, which were the worst conditions Coyle had ever seen. Kligler replied, "That's the way the schvartzes live," using the derogatory Yiddish word for black persons. (Tr. 357-58.) *fn3"

 The other person Hollander consulted with about running the company was the owner, Nacham Stein, with whom he spoke by telephone 2-3 times weekly. (Tr. 264.) Stein did not become involved in the hiring or firing of individual employees, but he visited the office every few weeks (Tr. 264) and had met and spoken with Derek Davis on occasion. (Tr. 148.) Stein knew that the setting of loss reserves was a problem in the company, because an inadequate reserve results in an unanticipated payment of a claim from the current year's income. Stein would frequently discuss the problem with Hollander. Once when Hollander was away on vacation, in August 1992, he spoke with Stein who was again concerned about this problem. (Hollander Dep. 7/22/96 Tr. 123). In Hollander's absence, the duty of running the Claims Department and setting the reserves fell to Linda Spruill, who is African American. (Id. at 123-125). When Stein learned of Spruill's duties, he berated Hollander, exclaiming, "No schvartze *fn4" is going to be making any decision with my money." (Id. at 125:16-17). The company's owner thus expressed his racist sentiment that no African American manager was fit to set his loss reserves or to pay claims. To his credit, Hollander revealed Stein's statement in his deposition testimony, and indicated he based his unfavorable opinion about Stein upon "the fact that he used that term, he described someone that way." (Id. at 126:11-15). Although Stein's statement came almost two years after Davis was fired, it was directed against an African American manager, who was Davis' former supervisor, who, like Davis, had substantial authority to determine payment of claims. Stein's statement was categorical, and it applied alike to Davis, who had been an African American manager who as PIP Supervisor had been empowered to authorize checks and pay PIP claims "with [Stein's] money."

 In November of 1990, Davis indicated he would prefer to return to his job as a claims examiner, stepping down from the PIP supervisor position. (Tr. 64, 146, 260, 313-314.) Davis asked to step down because he felt his policies were being undermined by Hollander and Kligler, and he was feeling frustration due to the unrealistic expectations Hollander and Kligler placed on the PIP unit. (Tr. 145-146.) Davis felt that Hollander had no understanding of PIP and the law requiring payments, and that Hollander's plans to reduce the PIP loss ratio were unachievable. (Tr. 176-77.) In time, Davis was proved to be correct, as the PIP unit's loss ratios were not thereafter reduced further.

 Davis' request was approved by Spruill and by Hollander. (Tr. 86, 260, 370.) Hollander was fully familiar with the PIP files and Kligler's criticisms of Davis, but he had no plans to terminate Davis when he approved his transfer back to the Bodily Injury Unit. (Tr. 370.) Roseann Coyle, supervisor of Bodily Injury, recalled that she was "very happy" to have Davis back working in her department. (Tr. 314.)

 Davis resumed functioning as a BI claims examiner. A week later, on December 6, 1990, Hollander told Spruill to fire Davis, to the shock of everyone, including Spruill (Tr. 64-65, 76, 97), Davis (Tr. 147, 167), and Coyle (Tr. 317-318, 369). The manner in which Hollander made the decision, and the reasons given for it, were so irrational and unlikely that they suggest the existence of an improper motive.

 Neither Hollander nor Rutgers Casualty identified any standards of performance that applied to Davis as PIP Supervisor, or explained how he failed to meet those standards. He had no job description, no articulated levels of performance or objectives to meet, and no quotas or goals for the unit's performance by which he would be evaluated. Whatever "standards" existed, Davis met them as PIP Supervisor and Hollander did not think otherwise at the time, even though Hollander would have liked more production from the PIP Unit. When he ...

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