O'REGAN v. Arbitration Forums, Inc.

• Decision Date: 31 July 1997
• Docket Number: No. 96-2290.,96-2290.
• Citation: 121 F.3d 1060
• Parties: Mary Anne O'REGAN, and National Arbitration Systems, Incorporated, an Illinois corporation, Plaintiffs-Appellants, v. ARBITRATION FORUMS, INCORPORATED, a New York non-profit corporation, and Yvonne Weaver, an Individual and as President of Arbitration Forums, Incorporated, Defendants-Appellees.
• Court: U.S. Court of Appeals — Seventh Circuit

121 F.3d 1060

Mary Anne O'REGAN, and National Arbitration Systems, Incorporated, an Illinois corporation, Plaintiffs-Appellants, v. ARBITRATION FORUMS, INCORPORATED, a New York non-profit corporation, and Yvonne Weaver, an Individual and as President of Arbitration Forums, Incorporated, Defendants-Appellees.

No. 96-2290.

United States Court of Appeals, Seventh Circuit.

Argued January 22, 1997.

Decided July 31, 1997.

As Amended on Denial for Rehearing and Suggestion for Rehearing September 8, 1997.

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James J. O'Regan (argued), Northbrook, IL, for Plaintiffs-Appellants.

Robert W. Pratt, Donald J. McNeil (argued), Norma W. Zeitler, Keck, Mahin & Cate, Chicago, IL, for Defendants-Appellees.

Before CUDAHY, ROVNER and EVANS, Circuit Judges.

As Amended on Denial for Rehearing and Suggestion for Rehearing En Banc September 8, 1997.

CUDAHY, Circuit Judge.

Mary Anne O'Regan began working for Arbitration Forums, Inc. (AF) in April of 1989. AF is a trade association of insurance companies; its primary purpose is to arbitrate auto liability disputes among its member companies. O'Regan was successful during her tenure; she was promoted twice and in January of 1990 became the Central Region Manager. In July of 1990 Yvonne Weaver assumed the Presidency of AF. O'Regan believes that Weaver began immediately to favor young, attractive, inexperienced males over their older female counterparts within AF. Nevertheless, it took until September 21, 1993 for O'Regan to report certain allegedly improper activities of Weaver to two members of AF's Board of Directors (and thus, constructively at least, to the entire Board).¹ On September 23, 1993 O'Regan received from AF a non-competition agreement; the agreement purported to restrict AF employees from engaging in competition with AF anywhere in the United States for two years after leaving AF's employ.² Accompanying the agreement was a memorandum directing her to sign it or face termination of her employment within ten days. The memorandum indicated that adherence to the non-competition agreement was required of all management and professional employees of AF. O'Regan refused to sign, saying that she believed the agreement to be in violation of Illinois law, "overbroad in its scope, Draconian in its provisions," and constituting an undue restraint of trade. She was therefore duly terminated.

At that point O'Regan brought a number of claims against AF, including claims for breach of oral promise, promissory estoppel, breach of implied contract, retaliatory discharge, sex and age discrimination, tortious interference, Sherman Act violations, Illinois Antitrust Act violations and conspiracy. The district court dismissed all of O'Regan's claims, most for failure to state a claim and some for lack of standing. She now appeals only the dismissal of the retaliatory discharge, sex and age discrimination and antitrust claims. Our review, of course, is on the face of the complaint, taking all O'Regan's allegations to be true. She also challenges the district court's refusal to grant her motion to add an additional party and to allow her to file a second amended complaint. We address each claim in turn.

I. Retaliatory Discharge

O'Regan believes that she was retaliatorily discharged for her whistle-blowing activities in reporting derogatory information about Weaver. She claims she "blew the whistle" on Weaver by reporting to AF Board members that: (1) Weaver was reporting personal "junkets" as tax-exempt business trips, (2) Weaver and AF were engaged in persistent age and sex discrimination and (3) Weaver and AF were violating the Illinois Antitrust Act and the Sherman Act in requiring adherence to the noncompetition agreement.

Illinois follows the common-law doctrine that employment-at-will³ means termination-at-will and is presumed to exist whenever an employee is hired without a fixed term. See Duldulao v. St. Mary of Nazareth Hosp. Ctr., 115 Ill.2d 482, 106 Ill. Dec. 8, 11-12, 505 N.E.2d 314, 317-18 (1987). The tort of retaliatory discharge is a narrow exception to that rule. See Barr v. Kelso-Burnett Co., 106 Ill.2d 520, 88 Ill.Dec. 628, 630, 478 N.E.2d 1354, 1356 (1985). It permits an employee "who is dismissed in violation of a clearly mandated public policy to bring a cause of action for retaliatory discharge." Belline v. K-Mart Corp., 940 F.2d 184, 186 (7th Cir.1991). To establish her claim of retaliatory discharge O'Regan must prove that she was (1) discharged (2) in retaliation for her activities and (3) that the discharge violated a clear mandate of public policy. Id. In Illinois, public policy is limited to those matters that "strike at the heart of a citizen's social rights, duties, and responsibilities" and do not impinge only on private interests. Palmateer v. Int'l Harvester Co., 85 Ill.2d 124, 52 Ill.Dec. 13, 16-17, 421 N.E.2d 876, 878-79 (1981).

O'Regan has shown that she was discharged, leaving for further consideration only the questions of why and whether the ascertained reason violated Illinois public policy. O'Regan's claim fails not primarily on public policy grounds, which we do not decide dispositively, but on the grounds that O'Regan has failed to allege facts sufficient to show retaliation. The precipitating event of O'Regan's termination was her refusal to sign AF's non-competition agreement. O'Regan asserts that she was required to sign the agreement in retaliation for her whistle-blowing activities. The noncompetition agreement, however, came into existence (and was circulated to at least some employees) on April 23, 1993,⁴ well before O'Regan reported Weaver's allegedly illegal actions to the AF Board on September 21, 1993. Further, and very importantly, O'Regan does not allege that she was treated differently than other employees with respect to the non-competition agreement. Thus O'Regan has failed to allege that her termination in response to the non-competition agreement could have been in retaliation for her report to the Board.

O'Regan argues that her termination violated Illinois public policy because she reported what she believed to be violations of federal income tax law by Weaver in taking improper business expense deductions. O'Regan reported that she thought Weaver was claiming as business trips what were really personal junkets. Reporting what is apparently criminal behavior, even if the reporting is done only internally (i.e., not to law enforcement agencies), as was done here, has often been protected against retaliatory discharge. See, e.g., Belline, 940 F.2d at 187. Determining whether a trip is for business or pleasure, however, may require the drawing of a fine line. And there is little here that clearly suggests criminal tax violations. O'Regan's allegation involving tax cheating by Weaver was accompanied by other charges that Weaver was exhibiting favoritism for young males generally, in part by having them accompany her on business trips. Thus, O'Regan's complaints may very well not have been of the sort protected under Illinois' definition of public policy. If, for example, O'Regan had reported that Weaver had repeatedly failed to file income tax returns at all, perhaps (although this is not clear) her reporting might have implicated a relevant Illinois public policy. We can find no reported case in which a purported violation of federal tax laws is claimed to violate Illinois public policy for retaliatory discharge purposes. We think that the public policy point is weak; but in any event O'Regan's claim fails because she has failed to allege facts showing that she was discharged in retaliation.

O'Regan also argues that firing her for refusing to sign the non-competition agreement was itself a retaliatory discharge. Because she believes that AF's non-competition agreement itself violates federal and state antitrust laws, she believes that to fire her for refusing to sign it constitutes a retaliatory discharge in violation of Illinois public policy.⁵ O'Regan's claim again fails. She cannot show that firing her for refusing to sign the non-competition agreement violated Illinois public policy. While a cause of action for retaliatory discharge "is allowed where the public policy is clear, ... the cause of action is denied where it is equally clear that only private interests are at stake." Long v. Commercial Carriers, Inc., 57 F.3d 592, 595 (7th Cir.1995) (internal quotations and citations omitted). O'Regan's antitrust claims based on the noncompetition agreement fail (as we discuss below), leaving only her private interest in her job; thus her retaliatory discharge claim is barred. Further, retaliatory discharge claims have been recognized only when an employee is fired for filing a workers' compensation claim or for blowing the whistle on a clear-cut law violation. See Lambert v. City of Lake Forest, 186 Ill. App.3d 937, 134 Ill.Dec. 709, 712, 542 N.E.2d 1216, 1219 (1989). The requirement to sign the noncompetition agreement here does not involve whistle-blowing as ordinarily defined since there is no disclosure of an illegal practice. Here the practice seems well-known but O'Regan refuses to assent to it. In any case, Illinois has not broadened the definition of whistle-blowing beyond instances where the alleged improper conduct reported is clear, violative of public policy and serious. For example, retaliatory discharge claims have not been allowed where a city manager was fired by the mayor for refusing to perform his official duties improperly for the political benefit of the mayor, Fellhauer v. City of Geneva, 142 Ill.2d 495, 154 Ill.Dec. 649, 568 N.E.2d 870 (1991), nor have they been allowed where an employee was fired for refusing to lie to an investigator and an attorney in an entirely internal city investigation. Lambert, 134 Ill.Dec. at 713, 542 N.E.2d at 1220.

The antitrust violations alleged by O'Regan (with respect to the non-competition agreement) are not clear and do not go "`to the...