Brown v. Hammond

810 F. Supp. 644, *; 1993 U.S. Dist. LEXIS 211, **;
125 Lab. Cas. (CCH) P57,373; 8 I.E.R. Cas. (BNA) 234

CYNTHIA J. BROWN v. ROBERT M. HAMMOND and ROBERT M. HAMMOND ASSOCIATES
CIVIL ACTION NO. 92-3155
UNITED STATES DISTRICT COURT FOR THE EASTERN DISTRICT OF PENNSYLVANIA
810 F. Supp. 644; 1993 U.S. Dist. LEXIS 211; 125 Lab. Cas. (CCH) P57,373; 8 I.E.R. Cas. (BNA) 234

January 12, 1993, Decided
January 12, 1993, Filed
DISPOSITION: [**1] IT IS HEREBY ORDERED that said Motion is GRANTED in part and DENIED in part in that counts I and III of plaintiff's complaint are DISMISSED.

CASE SUMMARY:

PROCEDURAL POSTURE: Plaintiff employee sued defendants, her former employer, which was a law firm, and one of its attorneys, claiming defendants terminated her in violation of public policy for reporting their allegedly wrongful billing practices to clients and authorities and for refusing to perform such wrongful acts. She also claimed defendants' acts were calculated to cause her harm so as to constitute a "prima facie tort." Defendants filed a motion to dismiss.

OVERVIEW: The employee claimed that while working as a paralegal and secretary, she was directed by defendants to bill the time she spent on client matters as "attorney's time" without notice to clients that the work was done by a non-lawyer. She alleged defendants told her to bill her work in that way despite her protests that the practice was improper. After she informed clients and authorities of defendants' practices, defendants imposed new work rules that applied only to the employee. She was then terminated. The court held that under the law of the forum state, Pennsylvania, an at-will employee could bring a wrongful discharge action only when the discharge violated a significant and recognized public policy. Defendants' acts of discharging the employee for her gratuitous alerting of others about their improper practices did not violate the type of significant, clearly mandated public policy required to satisfy the public policy exception. The employee did, however, state a claim based on defendants' terminating her for her refusal to perform the improper practices. An employer's discharge of an employee for refusing to violate the law involved important public policy considerations.

OUTCOME: The court granted defendants' motion in part. The court granted the motion insofar as it sought dismissal of the employee's claims that defendants terminated her in violation of public policy based on her acts of reporting defendants' allegedly wrongful acts and that their acts constituted a "prima facie tort." The court denied the motion relative to her claim she was terminated in violation of public policy for refusing to perform wrongful acts.

CORE TERMS: public policy, discharged, terminated, billing, public policy exception, mandated, misrepresentation, non-lawyer, reporting, paralegal, Pennsylvania Rules of Professional Conduct, failure to state a claim, wrongful discharge, specific intent, employment-at-will, discharging, termination, disclosure, favorable, customers, alerting, whistle, at-will, entity, unauthorized practice of law, violation of public policy, memorandum, supervisor
LexisNexis(R) Headnotes
Civil Procedure > Pleading & Practice > Defenses, Demurrers, & Objections > Failures to State Claims
Civil Procedure > Pleading & Practice > Defenses, Demurrers, & Objections > Motions to Dismiss

^HN1

The purpose of a Fed. R. Civ. P. 12(b)(6) motion is to test the legal sufficiency of a complaint. In deciding a motion to dismiss for failure to state a claim, the court must accept as true all the allegations in the complaint and all reasonable inferences that can be drawn therefrom, and view them in the light most favorable to the non-moving party. Dismissal is not appropriate unless it clearly appears that a plaintiff can prove no set of facts in support of his claim which would entitle him to relief. A complaint may be dismissed when the facts pled and the reasonable inferences drawn therefrom are legally insufficient to support the relief sought.

Labor & Employment Law > Employment Relationships > At-Will Employment > General Overview

^HN2

In Pennsylvania, absent a statutory or contractual provision to the contrary, either party may terminate an employment relationship for any or no reason. An employer may determine, without any fair hearing to an at-will employee, that the employer simply wishes to be rid of him. An employer's right to terminate an at-will employee is characterized as "virtually absolute."

^HN3

Pennsylvania recognizes a non-statutory cause of action for wrongful discharge from employment-at-will, but only in the quite narrow and limited circumstance where the discharge violates a significant and recognized public policy. Such a public policy must be "clearly mandated" and of a type that strikes at the heart of a citizen's social right, duties and responsibilities. A narrow, rather than expansive, interpretation of the public policy exception is applied. Public policy exceptions are recognized in only the most limited of circumstances. While courts generally look to constitutional or legislative pronouncements, some courts find an expression of significant public policy in professional codes of ethics.

Labor & Employment Law > Employment Relationships > At-Will Employment > General Overview
Labor & Employment Law > Employment Relationships > At-Will Employment > Exceptions > Public Policy
Labor & Employment Law > Wrongful Termination > Public Policy
Legal Ethics > Professional Conduct > General Overview

^HN4

The Pennsylvania Rules of Professional Conduct, as adopted by the Pennsylvania Supreme Court pursuant to state constitutional powers, Pa. Const. art. 5, § 10(c), can provide the basis for a public policy exception to the at will employment rule.

Labor & Employment Law > Employment Relationships > At-Will Employment > General Overview
Labor & Employment Law > Employment Relationships > At-Will Employment > Exceptions > Public Policy
Labor & Employment Law > Wrongful Termination > Public Policy
Labor & Employment Law > Wrongful Termination > Whistleblower Protection Act > Coverage & Definitions > Protected Activities

^HN5

In Pennsylvania, when determining whether an employee has a wrongful discharge claim pursuant to the public policy exception to the at will employment doctrine based on an employer's termination for the employee's acts of reporting the employer's allegedly wrongful conduct, the court must distinguish between gratuitous disclosure of improper employer conduct and disclosures by persons responsible for reporting such conduct or for protecting the public interest in the pertinent area.

^HN6

An employer's termination of an employee for the employee's gratuitous alerting of others about the employer's allegedly improper practices does not violate the type of significant, clearly mandated public policy required to satisfy the very narrow exception to Pennsylvania's rigid at will employment doctrine.

Labor & Employment Law > Employment Relationships > At-Will Employment > Exceptions > Public Policy
Labor & Employment Law > Wrongful Termination > Whistleblower Protection Act > Coverage & Definitions > Employers

^HN7

Labor & Employment Law > Wrongful Termination > Whistleblower Protection Act > Coverage & Definitions > Protected Activities

^HN8

While the Pennsylvania Whistleblower Law, 43 Pa. C.S.A. § 1421 et seq., protects covered employees who report impropriety to outside authorities, it does not authorize such employees to voice complaints directly to clients of a public or publicly funded entity.

Labor & Employment Law > Employment Relationships > At-Will Employment > General Overview
Labor & Employment Law > Employment Relationships > At-Will Employment > Exceptions > Public Policy
Legal Ethics > Client Relations > Billing & Collection
Legal Ethics > Professional Conduct > General Overview

^HN9

Because of the special nature of the attorney-client relationship, an attorney's misrepresentation about the source, quality, nature or cost of work performed is arguably more reprehensible than such misrepresentation to clients and customers by other suppliers of goods and services. It is not, however, sufficiently different in kind therefrom to satisfy the narrow public policy exception to Pennsylvania's stringent at will employment doctrine.

^HN10

Under Pennsylvania law, courts are less reluctant to discern important public policy considerations, for the purposes of the public policy exception to the at will employment doctrine, when employees are discharged for refusing to violate the law themselves. No employee should be forced to choose between his or her livelihood and engaging in fraud or other criminal conduct.

^HN11

Even assuming that a specific intent to harm exception to the employment at will doctrine exists in Pennsylvania, such an intent cannot be established by the harm normally occasioned by the act of discharging an employee. Any such exception would apply only in cases of purely malevolent conduct, that is, a termination for which no reason existed other than an atavistic desire to hurt another.

COUNSEL: For CYNTHIA J. BROWN, PLAINTIFF: SAMUEL A. SCOTT, HIESTAND ROAD, PO BOX 86, MACUNGIE, PA 18062, USA.

For ROBERT M. HAMMOND, ESQUIRE, individually and ROBERT HAMMOND ASSOCIATES, DEFENDANTS: GAIL ANN BRUNNER, MARGOLIS, EDELSTEIN, SCHERLIS, SAROWITZ & KRAEMER, THE CURTIS CTR., 4TH FL., INDEPENDENCE SQ. WEST, PHILA, PA 19106-3304, USA.

JUDGES: WALDMAN

OPINION BY: BY THE COURT; JAY C. WALDMAN

OPINION: [*645] MEMORANDUM

WALDMAN, J.

January 12, 1993

Plaintiff is a former employee of defendant attorney and his law firm. She is suing for wrongful discharge after having "blown the whistle" on the defendants' allegedly improper billing practices. Jurisdiction is based on diversity of citizenship. n1 Defendants have moved to dismiss the complaint for failure to state a claim upon which relief can be granted, pursuant to Fed. R. Civ. P. 12(b)(6).

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n1 Plaintiff is a citizen of Texas and defendants are citizens of Pennsylvania. The amount in controversy exceeds $ 50,000.

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I. LEGAL STANDARD

^HN1

The purpose of a Rule 12(b)(6) motion is to test the legal sufficiency of a complaint. See Sturm v. Clark, 835 F.2d 1009, 1111 (3d Cir. 1987). In deciding a motion to dismiss for failure to state a claim, the court must "accept as true all the allegations in the complaint and all reasonable inferences that can be drawn therefrom, and view them in the light most favorable to the non-moving party." See Rocks v. Philadelphia, 868 F.2d 644, 645 (3d Cir. 1989). Dismissal [*646] is not appropriate unless it clearly appears that plaintiff can prove no set of facts in support of his claim which would entitle him to relief. See Hishon v. King & Spalding, 467 U.S. 69, 73, 81 L. Ed. 2d 59, 104 S. Ct. 2229 (1984); Robb v. Philadelphia, 733 F.2d 286, 290 (3d Cir. 1984). A complaint may be dismissed when the facts pled and the reasonable inferences drawn therefrom are legally insufficient to support the relief sought. See Pennsylvania ex. rel. Zimmerman v. Pepsico, Inc., 836 F.2d 173, 179 (3d Cir. 1988).

II. FACTS

The pertinent factual allegations [**3] in the light most favorable to plaintiff are as follow. From November 4, 1990 to April 4, 1991, plaintiff was employed by defendants at will as a paralegal and secretary. The time she spent on client matters was billed to clients as "attorney's time" without any notice to such clients that the work was done by a non-lawyer. Her supervisors directed her at times to bill her work directly as attorney's time despite her protests that the practice was improper. She then informed various authorities and affected clients of this practice. Plaintiff does not allege that she had any responsibility for overseeing the firm's billing practices.

Defendants responded by imposing new work rules with respect to hours of employment which applied only to and discriminated against plaintiff. She was subsequently terminated.

In count I, plaintiff asserts that she was terminated in violation of public policy for reporting the wrongful actions of defendants. In count II, she asserts that she was terminated in violation of public policy for refusing to perform wrongful actions. In count III, she asserts that defendants' actions were intentional and calculated to cause her harm and thus constitute a "prima [**4] facie tort."

III. DISCUSSION

^HN2

It is well established under Pennsylvania law that "absent a statutory or contractual provision to the contrary

. . . either party [may] terminate an employment relationship for any or no reason." Geary v. United States Steel Corp., 456 Pa. 171, 175-176, 319 A.2d 174 (1974). An employer may determine, without any fair hearing to an at-will employee, that the employer simply wishes to be rid of him. Darlington v. General Electric, 350 Pa. Super. 183, 210, 504 A.2d 306 (1986). An employer's right to terminate an at-will employee has been characterized as "virtually absolute." O'Neill v. ARA Services, Inc., 457 F. Supp. 182, 186 (E.D. Pa. 1978).

^HN3

Pennsylvania law does recognize, however, a non-statutory cause of action for wrongful discharge from employment-at-will, but only in the quite narrow and limited circumstance where the discharge violates a significant and recognized public policy. Borse v. Piece Goods Shop, 963 F.2d 611, 617 (3d Cir. 1992); Geary, supra; Darlington, supra. Such a public [**5] policy must be "clearly mandated" and of a type that "strikes at the heart of a citizen's social right, duties and responsibilities." Novosel v. Nationwide Insurance Co., 721 F.2d 894, 899 (3d Cir. 1983). Geary signals a "narrow rather than expansive interpretation of the public policy exception." Bruffett v. Warner Communications, Inc., 692 F.2d 910, 918 (3d Cir. 1982). Public policy exceptions "have been recognized in only the most limited of circumstances." Clay v. Advanced Computer Applications, Inc., 522 Pa. 86, 89, 559 A.2d 917 (1989).

While courts generally look to constitutional or legislative pronouncements, some courts have found an expression of significant public policy in professional codes of ethics. See Paralegal v. Lawyer, 783 F. Supp. 230, 232 (E.D. Pa. 1992); Cisco v. United Parcel Services, 328 Pa. Super. 300, 476 A.2d 1340 (1984). See also Hansrote v. Amer Indus. Technologies, 586 F. Supp. 113, 115 (W.D. Pa. 1984)

The court in Paralegal found that ^HN4

the Pennsylvania Rules of Professional Conduct as adopted [**6] by the Pennsylvania Supreme Court pursuant to state constitutional powers, Pa. Const. art. 5, § 10(c), could provide the basis for a public policy [*647] exception to the at will employment rule. See Paralegal, 783 F. Supp. at 232 (finding public policy against falsifying material facts and evidence from Rules 3.3(a)(1), 3.4(a), and 3.4(b)). In that case, a paralegal whose employer was being investigated by the state bar was terminated after she learned that the attorney-employer had created a false record to exculpate himself and so informed the lawyer who was representing the employer in disciplinary proceedings.

Taking plaintiff's allegations as true, defendants would appear to have violated the Pennsylvania Rules of Professional Conduct by misrepresenting to clients who had performed work for which they were paying or by effectively permitting the unauthorized practice of law by a non-lawyer. See Rule 1.5 (regulating fees); Rule 5.5(a) (prohibiting aiding non-lawyers in unauthorized practice of law); Rule 7.1 (prohibiting false or misleading communications about lawyer's services); 8.4(c) (defining "professional misconduct" to include dishonesty, fraud, [**7] deceit or misrepresentation).

Based upon pertinent precedent and persuasive authority, ^HN5

the court must distinguish between gratuitous disclosure of improper employer conduct and disclosures by persons responsible for reporting such conduct or for protecting the public interest in the pertinent area. See Smith v. Calgon Carbon Corp., 917 F.2d 1338, 1345 (3d Cir. 1990), cert. denied, 113 L. Ed. 2d 660, 111 S. Ct. 1597 (1991)(discharged chemical company employee not responsible for reporting improper emissions or spills); Field v. Philadelphia Electric Co., 388 Pa. Super. 400, 565 A.2d 1170 (1989)(nuclear safety expert discharged for making statutorily required report to federal agency). See also Hays v. Beverly Enters., 766 F. Supp. 350 (W.D. Pa.), aff'd, c 952 F.2d 1392 (3d Cir. 1991) (physician's duty does not extend to plaintiff nurse); Gaiardo v. Ethyl Corp., 697 F. Supp. 1377 (M.D. Pa. 1986), aff'd, 835 F.2d 479 (3d Cir. 1987) (plaintiff not supervisor or responsible for quality control).

The court [**8] concludes that ^HN6

plaintiff's termination for gratuitously alerting others about defendants' improper billing practice does not violate the type of significant, clearly mandated public policy required to satisfy the very narrow exception to Pennsylvania's rigid at will employment doctrine. By her own characterization what plaintiff did was to "blow the whistle" on wrongful conduct by her employer. ^HN7

The Pennsylvania Whistleblower Law, 43 Pa. C.S.A. § 1421 et seq., protects from retaliatory adverse employment action employees of public bodies or entities receiving public appropriations who report wrongdoing. n2 That Law, which excludes from its protection wholly private employment, has been found not to codify any previously existing legal right or privilege and held not to constitute an expression of clearly mandated public policy in the context of private at will employment. n3 See Smith, 917 F.2d at 1346; Cohen v. Salick Health Care, Inc., 772 F. Supp. 1521, 1531 (E.D. Pa. 1991)(employee discharged for alerting employer's prospective contractee of inflated financial projections); Wagner v. General Electric Co., 760 F. Supp. 1146, 1155 (E.D. Pa. 1991) [**9] (employee discharged after expressing criticism of employer's product to customers).

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n2 ^HN8

While the Whistleblower Law protects covered employees who report impropriety to outside authorities, it does not authorize such employees to voice complaints directly to clients of a public or publicly funded entity.

n3 ^HN9

courts are less reluctant to discern important public policy considerations where persons are discharged for refusing to violate the law themselves. See Smith, 917 F.2d at 1344; Woodson v. AMF Leisureland Centers, Inc., 842 F.2d 699 (3d Cir. 1988) [**10] (refusal to sell liquor to intoxicated patron); Shaw v. [*648] Russell Trucking Line, Inc., 542 F. Supp. 776, 779 (W.D. Pa. 1982)(refusal to haul loads over legal weight); McNulty v. Borden, Inc., 474 F. Supp. 1111 (E.D. Pa. 1979)(refusal to engage in anti-trust violations). No employee should be forced to choose between his or her livelihood and engaging in fraud or other criminal conduct. To the extent that plaintiff appears to allege that she was also terminated for refusing herself to engage directly in fraudulent billing, her action may proceed.

Courts applying Pennsylvania law also have implied or assumed the existence of a specific intent to harm exception to the employment-at-will doctrine. See, e.g., Sugarman v. RCA Corp., 639 F. Supp. 780, 785 (M.D. Pa. 1985); McNulty, 474 F. Supp at 1119; Tourville v. Inter-Ocean Insurance Co., 353 Pa. Super. 53, 508 A.2d 1263 (1986), appeal denied, 514 Pa. 619 (1987). More recently, however, there is serious doubt about whether any such exception exists. See Mann v. J.E. Baker Co., 733 F. Supp. 885, 890 (M.D. Pa. 1990); [**11] McWilliams v. AT&T Information Systems, Inc., 728 F. Supp. 1186, 1193 (W.D. Pa. 1990); Paul v. Lankenau Hospital, 524 Pa. 90, 569 A.2d 346 (1990).

^HN11

Even assuming that a specific intent to harm exception exists, such an intent cannot be established by the harm normally occasioned by the act of discharging an employee. Tourville, supra at 56 n.5. Any such exception would apply only in cases of purely malevolent conduct, that is, a termination for which no reason existed other than "an atavistic desire to hurt another." Id. at 57. It appears from the face of plaintiff's complaint that defendants' reason for discharging her was conduct by her, however well motivated, which threatened to deprive defendants of clients and subject them to sanctions. To the extent that plaintiff's claim is premised upon an intent to harm theory, it will be dismissed.

An appropriate order will be entered.

ORDER

AND NOW, this 12th day of January, 1992, upon consideration of defendants' Motion to Dismiss Plaintiff's Complaint, consistent with the accompanying memorandum, IT IS HEREBY ORDERED [**12] that said Motion is GRANTED in part and DENIED in part in that counts I and III of plaintiff's complaint are DISMISSED.

BY THE COURT:

JAY C. WALDMAN, J.