McGrane v. Reader's Digest Ass'n, Inc., No. 92 Civ. 8132 (VLB).

• Decision Date: 27 May 1993
• Docket Number: No. 92 Civ. 8132 (VLB).
• Citation: 822 F. Supp. 1044
• Parties: Terrence L. McGRANE, Plaintiff, v. The READER'S DIGEST ASSOCIATION, INC., Defendant.
• Court: U.S. District Court — Southern District of New York

822 F. Supp. 1044

Terrence L. McGRANE, Plaintiff, v. The READER'S DIGEST ASSOCIATION, INC., Defendant.

No. 92 Civ. 8132 (VLB).

United States District Court, S.D. New York.

May 27, 1993.

Robert L. Brinton, Brinton & January, White Plains, NY, for plaintiff.

Robert E. Crotty, Kelley, Drye & Warren, New York City, for defendant.

MEMORANDUM ORDER

VINCENT L. BRODERICK, District Judge.

I

Plaintiff Terrence L. McGrane ("McGrane"), a former employee of defendant Reader's Digest Association, Inc. (the "Digest") brings this suit based on diversity of citizenship pursuant to 28 U.S.C. § 1332 seeking damages and other relief against the Digest. McGrane, hired as a fraud investigator for the Digest, claims that he was prevented from pursuing various reports of financial wrongdoing in ways he thought were appropriate and that he was then fired for continuing to raise these issues. Based on this overall accusation against the Digest, plaintiff alleges contractual and related claims based on the denial to him of the opportunity to perform assigned duties and on his termination. Plaintiff also asserts violation of New York's "whistle blower" statute, N.Y. Labor Law § 740.

I deny the Digest's motion to dismiss McGrane's complaint, subject to renewal of the motion or the filing of a motion for summary judgment after 45 days, during which McGrane may supplement the complaint by submitting information outlined below.

II

Over recent decades, public interest has increased in assuring protection for persons with inside information concerning wrongdoing where a coverup is involved within organizational entities, so that such information can reach proper authorities. This public concern is implemented by several legal provisions and doctrines.

At the federal level, administrative relief is available through the Merit Systems Protection Board. See 5 U.S.C. §§ 1206, 2301-02, 7511-12, 7701, discussed in 1978 U.S.Code Cong. & Admin. News 2723, and implemented by 5 CFR 315, 752.¹

New York's "whistle blower" statute (N.Y. Labor Law § 740) provides for judicial enforcement and covers only reporting relating to health and safety; it provides for reinstatement and similar equitable relief but precludes suits for tort-like damages. See Scaduto v. Restaurant Associates, 180 A.D.2d 458, 579 N.Y.S.2d 381 (1st Dept.1992).

In the state and local public sector, the First and Fourteenth Amendments protect the opportunity for public employees to raise matters of public interest (as opposed to individual employment disputes) publicly without adverse job consequences. See Connick v. Myers, 461 U.S. 138, 103 S.Ct. 1684, 75 L.Ed.2d 708 (1983).

Courts are increasingly reluctant to enforce secrecy arrangements where matters of substantial concern to the public — as distinct from trade secrets or other legitimately confidential information — may be involved. See generally Seattle Times v. Rhinehart, 467 U.S. 20, 104 S.Ct. 2199, 81 L.Ed.2d 17 (1984); Meyer Goldberg, Inc. v. Fisher Foods, 823 F.2d 159 (6th Cir.1987); In re Reporters Committee, 773 F.2d 1325 (D.C.Cir.1985) (dealing with judicial protective orders); see also "Commanche Peak and Rancho Seco Nuclear Power Plants," Hearing before the Subcommittee on Nuclear Regulation, Senate Environment and Public Works Comm., 101st Cong., 1st Sess. (May 4, 1989); Fifty-Ninth Report by the House Committee on Government Operations, H.Rep. 991, 100th Cong., 2d Sess. (1988).

Again at the federal level, where criminal wrongdoing and at times other misconduct are involved, arrangements to "cover up" may violate 18 U.S.C. § 3 (accessory after the fact), § 4 (misprision of felony), § 371 (conspiracy to defraud the United States), §§ 1341-1346 (mail and other fraud), §§ 1501-1517 (obstruction of justice) or other specific statutes including the Internal Revenue Code.²

Under various specific sources of law in the employment field but not involved here, retaliation for filing complaints is prohibited.

These legal concepts taken together suggest that one or more sources of law are likely to protect members of an organization bringing wrongdoing to the attention of proper authorities where an otherwise successful coverup is occurring. They also indicate that reporting of substantial health or safety risks can be protected even though internal remedies are useless.

These concepts do not suggest, however, that an employee may claim monetary damages because reporting internal to an organization is not to the levels, or on a timetable, which the employee may have been led to expect or to consider appropriate. Nor are financial improprieties placed on the same plane as threats to public health or safety. For better or worse, in most large corporate entities financial structures and their associated accounting, reporting and recordkeeping aspects are highly complex. Almost any disaffected member of a substantial corporate or institutional entity may find, in such entities, conditions or activities to complain about. This is a diversity case, and New York law applies. To avoid the cumulative effect of a potential flood of lawsuits seeking to convert ordinary employment disputes into "whistle-blower" protection cases, New York Labor Law § 740 (supra, p. 1045) is expressly limited to health and safety matters and permits solely equitable relief, not suits for tort damages.

Institutional entities are inherently vulnerable to allegations of abuses of authority within them, and to abusive claims of wrongdoing. They depend upon and must be regulated by legal standards, and they require protection from abuse of those standards. Thus in a case such as this, where allegations of corporate misconduct on a massive scale are asserted, courts must seek to penetrate beyond conclusory characterizations, and must require submission of additional detail where vagueness shrouds critical questions essential to a claim or defense.

III

The complaint in this case weighs approximately five (5) pounds and constitutes, with exhibits, hundreds of pages. It fails to set forth facts pinpointing any ongoing fraud or hazard to health or safety which has not been remedied by the Digest. It mentions no reporting to external authorities on the part of plaintiff McGrane and, a fortiori, no retaliation as a result of such reporting.

The complaint likewise fails to identify any specific contractual agreement, either oral or in writing, which was violated.

The complaint does contain vague references to violations of various laws, and to an unspecified problem involving candy. The sole actual financial fraud alleged in the complaint relates to an incident in Italy which led to dismissal of the alleged wrongdoers long before this lawsuit was filed. In describing what is no more than allegedly unfair, counterproductive or unethical behavior, the complaint as now drafted is deficient as a vehicle for pursuing a lawsuit under the Federal Rules of Civil Procedure. For contrast, see Volvo North America Corp. v. Men's International Professional Tennis Council, 857 F.2d 55 (2d Cir.1988); see generally Beaulieu v. United States, 865 F.2d 1351 (1st Cir.1989); Marcus, "The Revival of Fact Pleading Under the Federal Rules of Civil Procedure," 86 Colum.L.Rev. 433 (1986).

Such merit as McGrane's complaint may or may not have is obscured by a plethora of colorful and imprecise language, conclusory characterizations, and unfavorable adjectives to describe the behavior of various officers and employees of the defendant.³ Expressions of outrage do not replace the need, in federal pleading under Fed.R.Civ.P. 8, to state a claim upon which relief can be granted.

This is not a case in which the critical facts are known only to the adversary, justifying a pleading based largely on information and belief, drawing upon at times relatively thin inferences from those facts already known. See Mary Ann Pensiero, Inc. v. Lingle, 847 F.2d 90, 95 (3d Cir.1988); MacKnight v. Leonard Morse Hospital, 828 F.2d 48, 52 (1st Cir.1987); Cecere v. County of Westchester, 814 F.Supp. 378 (S.D.N.Y.1993).

IV

The Digest has moved to dismiss McGrane's complaint. While the deficiencies in the complaint might well justify dismissal, I am not prepared to dismiss the complaint with prejudice at this stage. Contrariwise, dismissal with leave to file a restated amended complaint might merely add to delay and expense without shedding extensive light on whether McGrane's underlying claims do or do not have potential merit.

The objectives of the Federal Rules impel me to seek another alternative for clarifying the question as to whether this lawsuit should be permitted to proceed beyond the complaint stage, and if so on what terms. See Fed.R.Civ.P. 1, sentence 2; Judicial Improvements Act of 1990, Pub.Law 101-650, 104 Stat. 5089, enacting 28 U.S.C. § 473.

I accordingly have denied the Digest's motion to dismiss without prejudice to renewal or filing of a motion for summary judgment after a period of 45 days. During that period McGrane may submit, subject to the strictures of Fed.R.Civ.P. 11, the factual information described below to supplement the allegations contained in the complaint in order to assist me in determining whether any of McGrane's claims may properly survive under Fed.R.Civ.P. 12(b)(6) or 56. Any submissions McGrane chooses to make pursuant to this leave will constitute additions to the complaint pursuant to Fed.R.Civ.P. 15(a), sentence 2. Whether or not sworn to, such submissions will only convert any subsequent motion to dismiss into a motion for summary judgment pursuant to Fed.R.Civ.P. 12(b) if the moving party likewise submits affidavits.⁴

V

McGrane points to no written agreement between himself and the Digest specifically or clearly insulating him from dismissal at will, ordinarily otherwise permitted by New York law. See Sabetay v. Sterling Drug, Inc., 69 N.Y.2d 329, 514 N.Y.S.2d 209, 506 N.E.2d 919 (1987); Murphy v. American Home Products, 58 N.Y.2d 293, 301, 461...