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Jahnke v. Deere & Co.

Supreme Court of Iowa

May 18, 2018

MATTHEW JAHNKE, Appellee,
v.
DEERE & COMPANY, RICHARD CZARNECKI, and BERNHARD HAAS, Appellants.

          Appeal from the Iowa District Court for Polk County, David M. Porter, Judge.

         The defendants were granted an interlocutory appeal from the denial by the district court of their motion for summary judgment.

          Frank Harty and Debra Hulett of Nyemaster Goode, P.C., Des Moines, for appellants.

          Paige Fiedler and Nathan Borland (until withdrawal) of Fiedler & Timmer, P.L.L.C., Johnston, and Roxanne Barton Conlin of Roxanne Conlin & Associates, P.C., Des Moines, for appellee.

          ZAGER, Justice.

         Matthew Jahnke was employed by Deere & Company and worked as the factory manager at Harbin Works located in Harbin, China, under a contract with the Deere Chinese subsidiary. Jahnke reported to Richard Czarnecki, who in turn reported to Dr. Bernard Haas.[1] In June 2014, Deere removed Jahnke as the factory manager of Harbin Works and repatriated him back to the United States. Deere ultimately assigned Jahnke to a position of lesser authority and lower pay in Waterloo, Iowa. This repatriation was taken as discipline for Jahnke engaging in unreported sexual relationships with two female, Chinese employees who were within his business span of control. Consequently, Jahnke filed suit under the Iowa Civil Rights Act alleging Deere discriminated against him based on his age, sex, and national origin. Deere moved for summary judgment claiming that the Iowa Civil Rights Act did not apply extraterritorially and that Jahnke based his claims on allegations of discriminatory acts that occurred outside of Iowa. The district court denied the motion. For the reasons expressed below, we reverse the decision of the district court.

         I. Background Facts and Proceedings.

         Matthew Jahnke is a U.S.-born Caucasian male of Polish descent. Jahnke began his employment with Deere in 1998. Jahnke was originally hired to work as an assembly manager in Waterloo, Iowa. Since then, he has been employed at various other locations within the Deere organization, including Springfield, Missouri; Ankeny, Iowa; and Harbin, China. In January 2011, Jahnke began a temporary expatriate work assignment as a project manager for a Deere subsidiary in Harbin, China. This assignment was scheduled to continue until December 2014. Jahnke oversaw construction and startup of a new facility in the region known as Harbin Works. Thereafter, Jahnke served as the factory manager of Harbin Works once it began production.

         Jahnke was employed at John Deere Des Moines Works in Ankeny, Iowa, when he accepted this expatriate assignment. When a United States citizen who works for Deere in the United States accepts an expatriate assignment, Deere assigns the employee to a home unit and host unit within its human resources systems. The home unit is the Deere location where the employee was located when he or she accepted the expatriate assignment. Thus, Jahnke's home unit was in Ankeny, Iowa. The home unit facilitates the international assignment paperwork, but it has minimal to no contact with the expatriate during the expatriate assignment. The home unit merely becomes the Deere unit where the employee last worked before the expatriate assignment commences. There is generally no established arrangement for the expatriate to return to the home unit upon completion of the expatriate assignment. Meanwhile, the host unit is the Deere location that the employee is assigned to as an international employee. In this case, the host unit was John Deere (China) Investment Co., Ltd. located in Beijing, China.

         As a condition of this assignment, Jahnke was required to enter into an employment contract with the host unit, John Deere (China) Investment Co., Ltd. As part of this employment contract, Jahnke was required to live and work in Harbin, China. Jahnke agreed to strictly observe the laws and regulations of the Peoples Republic of China and the various rules and systems of the company (China), including but not limited to the Code of Business Conduct. The employment contract also gave the company the right to impose disciplinary punishment on the employee for his or her violation of any of the rules and systems of the company. The host unit human resources department handled all human resource functions. This included, but was not limited to, handling all compensation, benefits, housing, vacation, and leave for its employees. As an expatriate, Jahnke was also eligible for benefits and compensation that were unavailable to United States citizens working for Deere within the United States. These additional benefits included additional compensation, a hardship allowance, a temporary living allowance, and income tax equalization and tax preparation for domestic and foreign tax returns. Deere placed Jahnke on its international payroll, which is administered at Deere World Headquarters in Moline, Illinois. The host unit was responsible for the expenses incurred in relocating Jahnke to China and for any business expenses incurred by Jahnke during the term of his employment.

         Upon accepting his expatriate position in China, Jahnke sold his home in Urbandale, Iowa, and lived in China from January 2011 until July 2014. Starting around 2012, Jahnke maintained a post office box in Bettendorf, Iowa, to receive mail in Iowa. During his time working in China, no income that Jahnke received was attributable to employment in Iowa, and he did not file personal Iowa income tax returns. In 2013, during the time Jahnke was living in China, he purchased a condominium in Florida. As part of his loan application, he stated this condominium would be his primary residence. Also in 2013, Jahnke copurchased a townhouse in Australia with a Chinese citizen. On his mortgage application and purchase contract, Jahnke claimed that his primary residence was Beijing, China.

         In June 2014, Jahnke became the subject of an investigation into his relationship with a Chinese, female subordinate. This investigation was conducted by international Deere employees working in China who made up the China Compliance Committee.[2] The investigation initially focused on the reported sexual relationship between Jahnke and Xu Meiduo, a twenty-eight-year-old Chinese woman who worked in the Harbin factory as a contracted language tutor. Jahnke had reported this relationship to his human resources manager and the Deere compliance hot line around February 2014. Further investigation revealed that Jahnke was also in an on-again, off-again sexual relationship with another Deere employee, Diana Pei, which began in 2011. Pei, a Chinese woman, was around thirty-six years old and worked as a financial controller for the Jiamusi, China factory when their relationship began. However, Pei was also assigned to assist Jahnke and the Harbin factory finance manager during the fall of 2011 through February 2012. Pei also served as a compliance ambassador for Deere along with her other job responsibilities. Neither Jahnke nor Pei reported their relationship to anyone at Deere.

         After the investigation was completed by the China Compliance Committee, the compliance committee recommended that Jahnke-then sixty-years old-be immediately removed from his position as factory manager at Harbin Works and repatriated back to the United States. This recommendation was the result of the committee's conclusion that Jahnke had engaged in sexual relationships with Chinese, female employees who were within his span of control pursuant to the Code of Business Conduct.

         Following the investigation, the China Compliance Committee consulted with Laurie Simpson, the vice president and chief compliance officer at Deere headquarters in Moline, Illinois. She agreed with the conclusion of the committee that Jahnke had violated the Deere Code of Business Conduct by failing to timely disclose his sexual relationships with Pei and Meiduo. She also agreed with the proposed disciplinary action. Consequently, Deere directed Richard Czarnecki and Dr. Bernard Haas to travel to Beijing, China, to meet with Jahnke.[3] Deere directed Czarnecki and Haas to inform Jahnke that he was being removed from his position as factory manager of Harbin Works and repatriated back to the United States. Czarnecki and Haas traveled to Beijing and met with Jahnke. They advised Jahnke that he was being removed from his position as factory manager of Harbin Works and would be repatriated back to the United States. Jahnke was advised that the action was being taken as discipline for his violation of the Deere Code of Business Conduct. It was unknown at that time where Jahnke would be reassigned. However, Jahnke was also considering retirement as an option.[4]

         In July 2014, Jahnke repatriated back to the United States. Upon repatriation, Jahnke requested that Deere ship his personal belongings from Harbin to his Florida home. In August, Jahnke began a new assignment as the program manager at John Deere Waterloo Works in Waterloo, Iowa. Jahnke went from a grade 13 salary position as factory manager of Harbin Works to a grade 11 salary position as program manager in Waterloo.

         On August 12, Jahnke filed a complaint with the Iowa Civil Rights Commission (ICRC). In the complaint, Jahnke claimed the decision to remove him from his position as factory manager of Harbin Works and repatriate him to the United States, as well as the decision to place him in a position with a lower pay grade, was motivated by discrimination based on his age, national origin, and sex. On April 24, 2015, Jahnke filed suit under the Iowa Civil Rights Act (ICRA), alleging Deere subjected him to employment discrimination based on his age, sex, and national origin. He claimed Deere disciplined him more harshly than the female employees with whom he had sexual relationships. Jahnke also alleged Deere disciplined him more harshly than it did the Deere employees of Chinese national origin who had engaged in comparable conduct. Moreover, he alleged Deere made its disciplinary decisions based on impermissible stereotypes regarding his age.

         Deere moved for summary judgment on July 14, 2016, arguing the ICRA does not apply extraterritorially and the alleged discriminatory acts occurred entirely outside of Iowa. The district court denied summary judgment, stating,

It is well-established, "a statute is prima facie operative only as to the persons or things within the territorial jurisdiction of the lawmaking powers which enacted it." This summary judgment record clearly establishes that both parties have sufficient contact with the State of Iowa in order for the Iowa Civil Rights Act to have territorial effect. On this issue, Defendants' Motion for Summary Judgment is DENIED.

         Deere applied for interlocutory appeal from the denial of their motion for summary judgment, which we granted. On appeal, Deere argues the ICRA does not apply extraterritorially and that Jahnke was not within the geographic reach of the ICRA as a United States citizen working abroad in China.

         II. ...


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