Donahue v. Schwegman, Lundberg, Woessner & Kluth, P.A.

• Decision Date: 15 December 1998
• Docket Number: No. C7-98-1018,C7-98-1018
• Citation: 586 N.W.2d 811
• Court: Minnesota Court of Appeals
• Parties: Kimberly DONAHUE, Appellant, v. SCHWEGMAN, LUNDBERG, WOESSNER & KLUTH, P.A., Respondent.

Page 811

586 N.W.2d 811

Kimberly DONAHUE, Appellant, v. SCHWEGMAN, LUNDBERG, WOESSNER & KLUTH, P.A., Respondent.

No. C7-98-1018.

Court of Appeals of Minnesota.

Dec. 15, 1998.

Review Denied Feb. 18, 1999.

Syllabus by the Court

A claim under the Whistleblower Act is actionable only if there is some nexus between the alleged improprieties and public policy.

Donald H. Nichols, Steven Andrew Smith, Nichols Kaster & Anderson, Minneapolis, MN (for appellant).

Terrence J. Fleming, Ann E. Kennedy, Lindquist & Vennum, P.L.L.P., Minneapolis, MN (for respondent).

Considered and decided by DAVIES, Presiding Judge, SCHUMACHER, Judge, and SHORT, Judge.

O P I N I O N

SHORT, Judge.

Kimberly Donahue sued her former employer, the law firm of Schwegman, Lundberg, Woessner & Kluth, P.A. (law firm), alleging constructive discharge in violation of the Whistleblower Act, Minn.Stat. § 181.932, subd. 1(a) (1996), and the Minnesota Human Rights Act, Minn.Stat. § 363.03, subd. 1(2)(b)-(c) (Supp.1997). The trial court concluded there was no public interest in the law firm's billing and payroll deduction practices, and Donahue failed to offer specific facts supporting her claims. On appeal from summary dismissal of her claims, Donahue argues the trial court misapplied the law.

F A C T S

In December 1993, Kimberly Donahue was hired as a law clerk for the law firm. Two years later Donahue became a full-time associate with a starting salary of $85,000 per year. On January 24, 1997, a law firm employee told Donahue that the law firm attached a 10% surcharge to the cost of all long distance calls made from the law firm and automatically deducted the surcharge from employee paychecks. Donahue sent an e-mail to three of the law firm's shareholders demanding that they disclose this billing and payroll deduction practice to all employees. Steve Lundberg, a managing shareholder, informed Donahue that the surcharge covered administrative costs associated with providing long distance phone service. However, Donahue was still concerned about the surcharge and payroll deduction practice, and reported to another shareholder that the practice may be unethical and violated Minnesota law. When Lundberg learned of Donahue's suggestion that the law firm was breaking the law, he sent Donahue an e-mail authorizing her to hire independent counsel to obtain a written opinion about the billing and payroll deduction practice. Lundberg also notified all law firm employees of the surcharge.

On February 4, 1997, the law firm stopped adding the 10% surcharge to long distance telephone costs. One week later, the attorney retained by Donahue to research the law firm's billing and payroll deduction practice submitted an evaluation that concluded the practice, due to its collection method of automatic deduction as opposed to the surcharge itself, was potentially illegal and unethical. In response, the law firm implemented a new system that permitted employees to pay monthly, either by check or deduction, for their telephone expenses.

Following this exchange concerning the payroll deduction practice, the law firm issued its February billing report, which, like previous billing reports, listed Donahue's year-to-date billing below her required hours. On March 17, 1997, the law firm placed Donahue on an alternative compensation plan, which did not implicate her status on the shareholder track, but reduced her minimum billing goal and withheld 33% of her salary unless she achieved her original, year-end billable hours goal. Around the same time, Donahue began looking for other employment. After considering two other comparable positions, Donahue resigned on April 22, 1997, to work for Faegre & Benson, L.L.P.

I S S U E S

I. Is there a public policy requirement under Minnesota's whistleblower statute?

II. Did Donahue fail to establish a claim of constructive discharge due to gender discrimination?

A N A L Y S I S

Statutory construction presents a question of law, which we review de novo. Hibbing Educ. Ass'n v. Public Employment Relations Bd., 369 N.W.2d 527, 529 (Minn.1985). On appeal from summary judgment, we determine whether genuine issues of material fact exist or whether the trial court erred in its application of the law. Minn. R. Civ. P. 56.03; DLH, Inc. v. Russ, 566 N.W.2d 60, 69 (Minn.1997). While we view the evidence in the light most favorable to the nonmoving party, the nonmovant must produce specific facts to create an issue for trial. Celotex Corp. v. Catrett, 477 U.S. 317, 322-23, 106 S.Ct. 2548, 2552, 91 L.Ed.2d 265 (1986); Ruud v. Great Plains Supply, Inc., 526 N.W.2d 369, 371 (Minn.1995). Allegations and speculation are not enough to avoid summary judgment. Bob Useldinger & Sons, Inc. v. Hangsleben, 505 N.W.2d 323, 328 (Minn.1993).

I.

Minnesota's whistleblower statute states, in relevant part:

An employer shall not discharge, discipline, threaten, otherwise discriminate against, or penalize an employee regarding the employee's compensation, terms, conditions, location, or privileges of employment because:

(a) the employee * * * in good faith, reports a violation or suspected violation of any federal or state law or rule adopted pursuant to law to an employer or to any governmental body or law enforcement official;

* * *

(c) the employee refuses an employer's order to perform an action that the employee has an objective basis in fact to believe violates any state or federal law or rule or regulation adopted pursuant to law, and the employee informs the employer that the order is being refused for that reason.

Minn.Stat. § 181.932, subd. 1(a), (c) (Supp.1997).

Donahue argues her report of the law firm's surcharge on long distance telephone calls and related payroll deduction practice led to her constructive discharge. However, the mere mention of a suspected violation already acknowledged by one's employer does not constitute a "report" under the whistleblower statute. Rothmeier v. Investment Advisers, Inc., 556 N.W.2d 590, 593 (Minn.App.1996), review denied (Minn. Feb. 26, 1997); see also Faust v. Ryder Commercial Leasing & Servs., 954 S.W.2d 383, 391 (Mo.Ct.App.1997) (concluding employee's "courtesy warning" to managers of possible exposure of their criminal activity does not constitute "whistleblowing"); Michaelson v. Minnesota Mining & Mfg. Co., 474 N.W.2d 174, 180 (Minn.App.1991) (characterizing employee's "report" as feedback which was insufficient to establish retaliatory discharge claim), aff'd., 479 N.W.2d 58 (Minn.1992). Donahue reported the law firm's billing and payroll deduction practice via an e-mail message to Lundberg on January 24, 1997. At that time, Donahue noted "I have now found out that other employees have discovered this, and brought it to your attention some time ago, yet the practice continues." Given this undisputed fact, we conclude her initial report amounted to nothing more than a complaint regarding an acknowledged law firm practice, and thus is not protected under the whistleblower statute.

Donahue also argues her second "report" on around February 3, 1997, to another law firm shareholder is protected under the whistleblower statute because, even if the law firm was aware of the payroll deduction practice, Donahue did not believe the law firm knew of its potential illegality. While this may be true when the facts are analyzed in the light most favorable to Donahue, her "report" concerning an internal payroll deduction practice fails to implicate public policy. See Hedglin v. City of Willmar, 582 N.W.2d 897, 903 (Minn.1998) (recognizing firefighters' reports also implicated public interest, and cautioning against construing whistleblower statute too broadly to protect reports without public policy nexus); see also Janklow v. Minnesota Bd. of Exam'rs for Nursing Home Adm'rs, 552 N.W.2d 711, 717 (Minn.1996) (stating "Whistleblower Act was enacted to protect the general public"); Williams v. St. Paul Ramsey Med. Ctr., Inc., 551 N.W.2d 483, 484 n. 1 (Minn.1996) (noting title of "whistleblower act" connotes action by neutral, or one who "blows the whistle" for protection of others in addition to whistleblower); Bersch v. Rgnonti & Assocs., Inc., 584 N.W.2d 783, 787 (Minn.App.1998) (concluding Minn.Stat. § 181.932, subd. 1(b) does not include additional public policy requirement because it already pertains to public initiated activities, but acknowledging Minnesota Supreme Court's caution in construing whistleblower statute too broadly), pet. for review filed (Minn. Nov. 12, 1998). See generally James H. Kaster, Putting "Public Policy" Back into Minnesota's Whistleblower Statute, Hennepin Law., June 1998, at 4-6 (discussing Minnesota's dilemma in interpreting scope of whistleblower statute).

Because interpreting the whistleblower statute to include a public policy requirement supports Minnesota's careful limitation of at-will employment exceptions to further public interest, we also conclude Donahue's failure to report a practice that implicates public policy leaves her unprotected by the whistleblower statute. See Phipps v. Clark Oil & Refining Corp., 396 N.W.2d 588, 590-91 (Minn.App.1986) (recognizing tort of wrongful discharge that requires termination contravene "clear mandate of public policy"), aff'd, 408 N.W.2d 569, 571 (Minn.1987); see also Jonathan W.J. Armour, Who's Afraid of the Big, Bad Whistle?: Minnesota's Recent Trend Toward Limiting Employer Liability Under the Whistleblower Statute, 19 Hamline L.Rev. 107, 114-16 (1995) (discussing evolution of public policy exception to employment at-will in Minnesota and other states).

Donahue argues she based her report to law firm shareholders on a good faith belief that the law firm's payroll deduction practice violated Minn.Stat. § 181.79 and, because all statutes are designed to protect the public, her report involved the public interest. See Minn.Stat. § 181.79, subd. 1 (1996) (prohibiting employers from making unauthorized deductions from employee...