Belfiore v. Merch. Link, LLC

Panel: Nazarian, Shaw Geter, Fader, JJ. Nazarian, J. Erik Belfiore served in various executive positions at Merchant Link, LLC ("Merchant Link") over a period of six years, and rose ultimately to the position of Chief Operating Officer. In 2011, he sought a pay increase, and the company was considering it. Before a final decision was made, though, he was terminated after he tried, the company contends, to sabotage an important company project.

He challenged his termination in the Montgomery County Office of Human Rights ("OHR"), alleging that he had been fired and, before that, denied the pay increase, on the basis of race. After a six-day evidentiary hearing, a hearing examiner found that Merchant Link had established non-discriminatory reasons to justify his pay and termination. The Circuit Court for Montgomery County affirmed OHR's decision, and we affirm it as well. I. BACKGROUND Merchant Link is headquartered in Silver Spring and serves as an electronic intermediary between credit card issuers and merchants.

The company uses proprietary systems to process and provide security for up to five billion credit card transactions per year. Merchant Link hired Mr. Belfiore in September 2005 as a financial analysis manager, and he served as Merchant Link's chief operating officer ("COO") from mid-2008 until November 2011. In December 2008, after some corporate restructuring, Merchant Link became a joint venture owned by the company's two major clients, Chase Paymentech ("Chase") and First Data Corporation ("First Data") and managed by a board of managers (the "Board") that consisted of Chase and First Data executives. The Board was responsible for approving the appointment and replacement of Merchant Link officers and for setting officer compensation.

Shortly before the corporate restructuring, in May 2008, Mr. Belfiore had been appointed as Merchant Link's COO. Mr. Belfiore replaced Dan Lane, an original employee of the company who was appointed Chief Technology Officer ("CTO"). At its first meeting in 2008, the Board elected Messrs. Belfiore and Lane and Christopher Justice, who had been the company's president before the restructuring, as "officers" of the new joint venture.

Mr. Belfiore remained COO, Mr. Lane remained CTO, and Mr. Justice was elected Chief Executive Officer ("CEO"). Mr. Justice resigned in March 2009 and was replaced as CEO on an "interim" basis by Board member Daniel Charron. During this period, Mr. Charron remained at his office in Dallas and delegated day-to-day operational control to Mr. Belfiore, Mr. Lane, and Timothy Kinsella, the executive vice president for sales. Mr. Charron served as interim CEO for approximately two years.

In April 2011, Mr. Lane took over as CEO. At its first meeting in December 2008, the Board created a compensation committee, and appointed two of its members, Mr. Charron and Barry McCarthy, to serve on it. Mr. Belfiore asserts that Messrs. Charron, McCarthy, and Lane discriminated against him based on his race (he is African-American) in setting his compensation between 2009 and 2011, and that Mr. Lane retaliated against him by firing him when Mr. Belfiore threatened legal action over his pay.

Merchant Link had a somewhat complex compensation system. Each employee was assigned a grade, but each grade has a broad salary range, and a lower-grade employee might earn more than a higher-grade one. Salaries were supplemented by two bonus plans: the "annual incentive plan" ("AIP") bonus and "long term incentive plan" ("LTIP") grants. AIP bonuses were a percentage of total salary and increases based on grade.

LTIP grants were awarded from a pool of money tied to the company's overall economic performance. The amount of the pool was proposed initially by the CEO to the Board; once approved, the CEO had broad flexibility to set individual awards. Mr. Belfiore received raises throughout the period from 2008 to 2011. His salary went from approximately $105,000 in 2008 to $130,000 in 2011.

His AIP bonuses and LTIP grants increased his overall compensation in 2009 and 2010 by more than $90,000 in each of those years, and he received a total of $195,000 between salary and bonuses in 2011 before he was fired in November of that year. In August 2011, after Mr. Belfiore had requested a raise after negotiations, Mr. Lane agreed to raise Mr. Belfiore's salary from $130,000 to $172,000, and the raise went into effect for two pay periods. But on October 6, 2011, Mr. Lane heard from Merchant Link's chief financial officer that the increase needed Board approval, and that the higher payments needed to be recouped, at least temporarily. Mr. Lane gave Mr. Belfiore this news and assured him he would try to persuade the compensation committee ( i.e. , Messrs.

Charron and McCarthy) to approve the raise. On October 11, Mr. Lane asked human resources director Wendy Nussbaum to prepare a request to the compensation committee to increase Mr. Belfiore's salary. Ms. Nussbaum did so, and included information about the salaries of positions at Merchant Link that could be considered comparable to COO, as well as a survey of local and nationwide COO compensation. On October 13, Mr. Lane wrote to Mr. McCarthy to recommend that the company pay Mr. Belfiore at the higher rate.

Mr. Lane also informed Mr. McCarthy that Mr. Charron would support the request. After some back-and-forth with Mr. Lane, on the phone and via email, Mr. McCarthy wrote to Mr. Lane on October 20 and denied the increase, pending deliberations by the compensation committee. Mr. McCarthy asked Mr. Lane to schedule a committee meeting. On October 21, Mr. Belfiore sent an email to Messrs.

Charron, McCarthy, and Lane, complaining that his compensation was not adequate and attributing the shortfall to "your actions and inaction" stemming from racial discrimination. Mr. Belfiore wrote that he had no choice but "to initiate the process of identifying a suitable legal resolution." It was not until he received this email that Mr. McCarthy (a First Data executive) became aware that Mr. Belfiore is African-American. On October 25, the compensation committee met, and, according to an email from Mr. Lane to Messrs. McCarthy and Charron, Ms. Nussbaum, and to Merchant Link's outside counsel Harry Jones, requested additional information about Mr. Belfiore's historical compensation, his role at the company, and other executive compensation.

Mr. Lane stated in the email that he would schedule another committee meeting, but the committee never met before Mr. Belfiore's employment was terminated twelve days later. On November 8, Mr. Belfiore called a lower-level employee, Renee Dantzler, into his office. According to Ms. Dantzler, Mr. Belfiore asked her for help in undermining the company's new customer relations management ("CRM") system, used profanity, and upset her. The following day, Ms. Dantzler reported the meeting to her supervisor Zack Minton, and on November 10, put the incident in writing to Ms. Nussbaum; Mr. Minton also wrote an email to Ms. Nussbaum and Mr. Lane about the incident.

No one talked to Mr. Belfiore. On November 11, Mr. Lane fired Mr. Belfiore. Messrs. McCarthy and Charron testified that the Board had approved the termination (although no evidence of a Board meeting concerning the termination exists, and Merchant Link did not call the two other Board members to testify at the administrative hearing we will describe shortly).

Mr. Belfiore filed a complaint in December 2011 in the Montgomery County Office of Human Rights ("OHR"). The Case Review Board of the OHR's Commission on Human Rights (the "Commission") referred the case for a hearing before the Office of Zoning and Administrative Hearings. After discovery, a hearing examiner conducted a six-day evidentiary hearing. Ten witnesses testified and two transcripts were admitted into evidence.

The hearing examiner issued a seventy-eight-page opinion on August 17, 2015, recommending that the Commission find that Mr. Belfiore failed to prove his claims under sections 27-19(a)(1) and 27-19(c)(1) of the Montgomery County Code. The Case Review Board issued a final Decision and Order affirming the hearing examiner's report and recommendation. We will discuss the Decision and Order in greater detail in the Discussion below. On June 6, 2016, Mr. Belfiore sought judicial review of that decision in the Circuit Court for Montgomery County.

The circuit court affirmed the Case Review Board's decision on November 16, 2016. This Court reviews the agency decision, which in this case is the hearing examiner's report and recommendation, as adopted in full by the agency. Flaa v. Manor Country Club , 158 Md. App. 483 , 494, 857 A.2d 604 (2004), rev'd on other grounds , 387 Md. 297 , 874 A.2d 1020 (2005).

II

DISCUSSION Mr. Belfiore argues on appeal 1 that the hearing examiner erred in finding that he failed to establish his discriminatory compensation and retaliation claims. 2 "On appellate review of the decision of an administrative agency, this Court reviews the agency's decision, not the circuit court's decision." Long Green Valley Ass'n v. Prigel Family Creamery , 206 Md. App. 264 , 273-74, 47 A.3d 1087 (2012) (cleaned up). "[W]e apply a limited standard of review and will not disturb an administrative decision on appeal if substantial evidence supports factual findings and no error of law exists." Id. ; accord Flaa , 158 Md. App. at 494 -95 , 857 A.2d 604 . The substantial evidence test looks at "whether a reasoning mind reasonably could have reached the factual conclusion the agency reached." Board of Physician Quality Assurance v. Banks , 354 Md. 59 , 68, 729 A.2d 376 (1999) (quoting Bulluck v. Pelham Wood Apts. , 283 Md. 505 , 512, 390 A.2d 1119 (1978) ). "The reviewing court also must review the agency's decision in the light most favorable to the agency, since decisions of administrative agencies are prima facie correct and carry with them the presumption of validity." Baltimore Lutheran High School Assoc., Inc. v. Employment Security Admin. , 302 Md. 649 , 662-63, 490 A.2d 701 (1985) (citing Bulluck , 283 Md. at 512 -13 , 390 A.2d 1119 ).

"A reviewing court should defer to the agency's fact-finding and drawing of inferences if they are supported by the record." Banks , 354 Md. at 68 , 729 A.2d 376 (citing CBS v. Comptroller , 319 Md. 687 , 698, 575 A.2d 324 (1990) ); Baltimore Lutheran High School , 302 Md. at 662 -63 , 490 A.2d 701 ("Furthermore, not only is it the province of the agency to resolve conflicting evidence, but where inconsistent inferences from the same evidence can be drawn, it is for the agency to draw the inferences.") (citing Bulluck , 283 Md. at 512 -13 , 390 A.2d 1119 ); accord Maryland Aviation Admin. v. Noland , 386 Md. 556 , 572-73, 873 A.2d 1145 (2005). When deciding issues of law, our review is more expansive, although the agency's interpretation of a statute that the agency administers "should ordinarily be given considerable weight by reviewing courts." Banks , 354 Md. at 69 , 729 A.2d 376 (citations omitted). And our review of mixed law and fact asks "whether a reasoning mind could reasonably have reached the conclusion reached by the agency, consistent with a proper application of the controlling legal principles." State Comm'n on Human Relations v. Kaydon Ring & Seal, Inc. , 149 Md. App. 666 , 692, 818 A.2d 259 (2003) (cleaned up). A. The Commission Did Not Err In Denying Mr. Belfiore's Claim For Discriminatory Compensation.

Mr. Belfiore argues first that the hearing examiner erred in finding against him on his claim for discriminatory compensation under Montgomery County Code § 27-19(a)(1)(A). That section prohibits employers from "discriminat[ing ] against any individual with respect to compensation, terms, conditions, or privileges of employment" because of the individual's race. To prove a violation of this section, Mr. Belfiore relies on the "disparate treatment" theory, which "is the most easily understood type of discrimination. The employer simply treats some people less favorably than others because of their race, color, religion, sex, or national origin." International Brotherhood of Teamsters v. United States , 431 U.S. 324 , 335 n. 15, 97 S.Ct. 1843 , 52 L.Ed.2d 396 (1977).

Claims of disparate treatment may be proven by direct or circumstantial evidence. Dobkin v. Univ. of Baltimore Sch. of Law , 210 Md. App. 580 , 591-92, 63 A.3d 692 (2013). The parties agree that there is no direct evidence of racial discrimination here, and in cases where the evidence of discrimination is circumstantial rather than direct, Maryland courts apply the three-step burden-shifting analysis first articulated in McDonnell Douglas Corp. v. Green , 411 U.S. 792 , 93 S.Ct. 1817 , 36 L.Ed.2d 668 (1973). See Dobkin , 210 Md. App. at 592 -93 , 63 A.3d 692 .

At the first step, the employee must establish a prima facie case of discrimination. McDonnell Douglas , 411 U.S. at 801 -02 , 93 S.Ct. 1817 ; Texas Dept. of Community Affairs v. Burdine , 450 U.S. 248 , 253, 101 S.Ct. 1089 , 67 L.Ed.2d 207 (1981). Mr. Belfiore can meet this initial burden by proving that he is a member of a protected class, that he performed work substantially similar to those outside the protected class, and that he was paid less than those outside the protected class. Kess v. Municipal Employees Credit Union of Baltimore, Inc. , 319 F.Supp.2d 637 , 644 (D. Md. 2004) ; see Brinkley-Obu v. Hughes Training, Inc. , 36 F.3d 336 , 343 (4th Cir. 1994). 3 If he meets that burden, a presumption arises "that the employer unlawfully discriminated against the employee." Burdine , 450 U.S. at 254 , 101 S.Ct. 1089 .

At Step 2, the employer can rebut the prima facie case by presenting evidence of "some legitimate, nondiscriminatory reason" for the alleged disparate treatment. McDonnell Douglas , 411 U.S. at 802 , 93 S.Ct. 1817 ; Burdine , 450 U.S. at 254 , 101 S.Ct. 1089 . " '[T]he defendant must clearly set forth, through the introduction of admissible evidence,' reasons for its actions which, if believed by the trier of fact , would support a finding that unlawful discrimination was not the cause of the employment action." St. Mary's Honor Center v. Hicks , 509 U.S. 502 , 507, 113 S.Ct. 2742 , 125 L.Ed.2d 407 (1993) (emphasis in original) (quoting and citing Burdine , 450 U.S. at 254-55 and n. 8, 101 S.Ct. 1089 ). Importantly, "although the McDonnell Douglas presumption shifts the burden of production to the defendant, '[t]he ultimate burden of persuading the trier of fact that the defendant intentionally discriminated against the plaintiff remains at all times with the plaintiff.' " Id.

(quoting Burdine , 450 U.S. at 253 , 101 S.Ct. 1089 ). If Merchant Link succeeds at Step 2, Mr. Belfiore "must then have an opportunity to prove by a preponderance of the evidence that the reasons offered by the defendant were not its true reasons, but were a pretext for discrimination." Burdine , 450 U.S. at 253 , 101 S.Ct. 1089 . To succeed in meeting his or her ultimate burden of persuasion, the plaintiff must prove that the proffered reasons were pretextual or unworthy of credence " and that discrimination was the real reason." Hicks , 509 U.S. at 515 , 113 S.Ct. 2742 (emphasis in original). Put another way, the first step's presumption of discrimination "simply drops out of the picture," id. at 511 , 113 S.Ct. 2742 , and the plaintiff employee retains the burden of persuasion to prove, by a preponderance of the evidence, that he or she "has been the victim of intentional discrimination." Id. at 508 , 113 S.Ct. 2742 (quoting Burdine , 450 U.S. at 256 , 101 S.Ct. 1089 ).

The hearing examiner found that Mr. Belfiore succeeded in establishing a prima facie case of discriminatory compensation and that Merchant Link successfully proffered legitimate reasons for the differences in compensation. But the hearing examiner ultimately found that Mr. Belfiore failed to prove, by a preponderance of the evidence, that Merchant Link's proffered reasons were pretextual or that Mr. Belfiore's relatively lower compensation was due to any racial discrimination by Merchant Link. Mr. Belfiore challenges the hearing examiner's analysis of the second and third steps, but we discern no error on this record. Before addressing Mr. Belfiore's particular arguments, though, we need to walk through the hearing examiner's findings.

At the first step, the hearing examiner found that Mr. Belfiore, who is African-American (and thus a member of a protected class) demonstrated that he was paid less than similarly situated counterparts. The hearing examiner based that finding on two things: that (1) Mr. Belfiore "was one of only three second-tier executives" and the other two (Messrs. Lane and Kinsella) "out-earned him considerably" and (2) other employees lower in the hierarchy earned more than Mr. Belfiore did. The employees whose salaries were compared to Mr. Belfiore's were " 'white' or Indian." The examiner also found that Mr. Belfiore's prima facie case was "bolster[ed]" by at least four other conclusions: • In 2008, Mr. Charron refused to increase Mr. Belfiore's salary to match Mr. Lane's, "relying on a purported policy" that disallowed raises that were more than 10%, but that "so far as the record shows, did not exist;" • Even though Mr. Belfiore supervised half or more of Merchant Link's employees, Merchant Link raised his pay grade only to "a mid-range management level," and, when the grade was ultimately raised to the highest level, it was without retroactive salary or AIP bonus adjustments; • Mr. Lane hired three new employees (Messrs.

Smith and Sutherland and Ms. Kirby-Meck) whose salaries were set "well above the $130,000 [salary] that Mr. Belfiore was earning;" and • The Board did not approve Mr. Belfiore's $42,000 salary raise in 2011 by the time he was fired. The hearing examiner continued his analysis at the second and third steps, finding that Merchant Link "gave reasons for the compensation disparities and the practices that created them," and that Mr. Belfiore had failed to produce evidence sufficient to establish that those reasons were pretextual. First , with respect to Mr. Lane as a comparator, the hearing examiner found that Mr. Belfiore's compensation as COO was less than Mr. Lane's had been in that position "because the departments and personnel transferred from Lane to Belfiore were only a subset of those Mr. Lane had supervised" and because Mr. Lane had been an original employee, if not co-founder, of the company and a contributor to some of its technology. Second , the examiner found legitimate Merchant Link's explanation that the other two groups of comparators-executives (Messrs.

Kinsella and Smith) and technology employees (Messrs. Konar, Chudasama, and Zloth)-had different skills and responsibilities that warranted higher compensation. Mr. Belfiore characterizes the hearing examiner's analysis at this stage as "deficient." But it is not our role to weigh the evidence for ourselves, and the record and the examiner's decision reveal a thorough and careful review and analysis of the evidence Mr. Belfiore presented. In discussing the comparator evidence, for example, the hearing examiner specifically addressed Mr. Belfiore's arguments that Merchant Link's proffered reasons were a pretext for racial discrimination.

The hearing examiner credited the company's testimony that job title alone did not determine salary, and that job duties drove the process as well. He found that Mr. Lane's salary reflected his status as a co-founder or original employee and the fact that his responsibilities as COO were broader in scope than Mr. Belfiore's in the same role. And he found no evidence to support the claim that the other two groups of comparators ( i.e. , executives and technical employees) had different responsibilities that did not deserve higher