Document ID: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-caDC-96-07067/USCOURTS-caDC-96-07067-0/pdf.json

Parties Involved:
James Liberatore
Appellant
Melville Corporation
Appellee

Document Text:

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United States Court of Appeals

FOR THE DISTRICT OF COLUMBIA CIRCUIT

Argued April 13, 1998 Decided March 16, 1999

No. 96-7067

James Liberatore,

Appellant

v.

Melville Corporation, t/a CVS,

Appellee

Appeal from the United States District Court

for the District of Columbia

(No. 94cv01422)

Damon K. Bernstein argued the cause and filed the briefs

for appellant.

John M. Nolan argued the cause for appellee, with whom

Carlton J. Trosclair was on the brief.

Before: Henderson, Rogers and Garland, Circuit Judges.

Opinion for the Court filed by Circuit Judge Rogers.

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Rogers, Circuit Judge: James Liberatore appeals from the

grant of summary judgment to his former employer, the

Melville Corporation ("Melville") on his claim for wrongful

discharge. Although hired as an at-will employee, he contends that his discharge was in retaliation for his threat to

report to the Federal Drug Administration ("FDA") the

unlawful condition in which his employer was storing pharmaceutical drugs, and that his claim of wrongful discharge

therefore falls within the public policy exception to the at-will

employment doctrine under District of Columbia law. While

his appeal was pending, the District of Columbia Court of

Appeals decided Carl v. Children's Hospital, 702 A.2d 159

(D.C. 1997) (en banc), in which the court held that the public

policy exception was not limited to cases where an at-will

employee was discharged for having outright refused to violate a law.1 Id. at 160. Thereafter, in Washington v. Guest

Services, 718 A.2d 1071 (D.C. 1998), that court held Carl was

retroactive.2 Accordingly, we hold that Liberatore has stated

a cause of action for wrongful discharge under Carl's expanded public policy exception to the at-will employment doctrine,

and we reverse.

I.

James Liberatore was employed from 1980 to 1993 as a

pharmacist for People's Drug Store, and subsequently for

CVS when CVS's parent company, the Melville Corporation,

purchased People's in 1990. It is undisputed that he was an

__________

1 After Liberatore filed his appeal of the October 2, 1995 order

granting summary judgment to the Melville Corporation, he filed a

motion to stay the appeal on October 18, 1996 pending the District

of Columbia Court of Appeals' en banc decision in Carl. The

motion to stay was granted on November 8, 1996.

2 Following oral argument, this court held Liberatore's appeal

in abeyance pending a decision by the D.C. Court of Appeals on

whether Carl was retroactive. Order of April 16, 1998. That issue

was decided in Washington, which became final on December 17,

1998, when the D.C. Court of Appeals denied a petition for rehearing en banc.

at-will employee.3 At the time of his discharge, Liberatore

was the manager of the pharmacy department at the Thomas

Circle drug store in the District of Columbia. In late January 1993, the pharmacy was relocated to a glass enclosed area

that protruded beyond the building's exterior wall. Liberatore and other employees began to notice that inadequate

temperature control in the pharmacy was adversely affecting

the condition of certain drugs. Liberatore initially brought

the matter to the attention of his immediate supervisor, Nita

Sood, and later to her supervisor, Jon Roberts. Liberatore

continued to report his concerns to upper-level management

as the temperature in the pharmacy rose, causing visible

adulteration of a number of drugs. Although management

informed Liberatore that it was working on the problem, the

problem persisted during the spring and early summer.

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On July 29, 1993, Liberatore told the Area Vice President,

Larry Merlo, that although he "didn't want to have to do

this," he had a neighbor who was the "number three guy in

the FDA," and he wondered what the FDA "would think

about a seven month delay in a drugstore that can't control

the temperatures of the pharmacy." That evening, management authorized the removal of drugs worth $250,000 from

the pharmacy for reclamation.4 On August 2, 1993, Liberatore's immediate supervisor notified the loss prevention department that certain other drugs were missing from inventory. After the department questioned pharmacy staff about

the shortage, Liberatore was identified as a suspect, and

management turned over the investigation to the Metropolitan Police Department. On August 6, Liberatore was questioned by the police. On the same date, Liberatore was

discharged; the stated reason was not the drug loss investi-

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3 Under District of Columbia law, "employment is presumed to

be at will, unless the contract of employment expressly provides

otherwise." Carl, 702 A.2d at 162.

4 Reclamation is the process by which drugs unfit for sale are

reclaimed, removed from the store's inventory, and eventually

destroyed.

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gation, but the lapse of Liberatore's pharmacy license, which

management claimed not to have discovered until that date.

Liberatore sued Melville for wrongful discharge and defamation.5 He alleged that he was fired because he threatened

to report the temperature control problem in the pharmacy to

the FDA, and that his lapsed license was a pretext because

other pharmacists were not fired for failing to renew their

licenses and his supervisor had known of his lapsed license

for months. The district court dismissed Liberatore's wrongful discharge claim for failure to state a cause of action within

the narrow public policy exception to at-will employment set

forth by the District of Columbia Court of Appeals in Adams

v. George W. Cochran & Co., 597 A.2d 28, 34 (D.C. 1991).

Although Liberatore had complained to various supervisors

and threatened to report the temperature control problem to

the FDA, the district court concluded that because he continued to dispense drugs voluntarily, unlike the plaintiff in

Adams, he did not present his employer with an outright

refusal to violate a specific statute or regulation.

II.

An employee who serves at the will of his or her employer

may be discharged "at any time and for any reason, or for no

reason at all." Adams, 597 A.2d at 30; see Pfeffer v. Ernst,

82 A.2d 763, 764 (D.C. 1951). This proposition "has long been

settled in the District of Columbia," Adams, 597 A.2d at 30,

and it is only in recent years that the District of Columbia

Court of Appeals has identified a public policy exception to

the at-will employment doctrine. In Adams, the D.C. Court

of Appeals held that an at-will employee stated a cause of

action for wrongful discharge where the employee would have

been forced to violate the law in order to avoid termination.

The employer in Adams had allegedly fired a delivery truck

driver after he had refused to drive a truck that did not have

an inspection sticker on its windshield because it was illegal

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5 Liberatore does not appeal the award of no damages on his

defamation claim arising from a CVS security guard's statement

that Liberatore had been using or taking drugs.

to operate a motor vehicle in the District of Columbia without

one. Id. at 29-30 & n.1. The D.C. Court of Appeals concluded that because the employer's instructions would have forced

Adams to violate the law, strong public policy considerations

weighed in favor of a narrow exception to the at-will employment doctrine. The court explained:

Appellant Adams was forced to choose between violating

the regulation and keeping his job--the very choice

which, ... he should not have been required to make.

Even though the criminal liability facing him was not

very great, it was nonetheless unacceptable and unlawful

for his employer to compel him to choose between breaking the law and keeping his job. We therefore hold, ...

that there is a very narrow exception to the at-will

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doctrine under which a discharged at-will employee may

sue his or her former employer for wrongful discharge

when the sole reason for the discharge is the employee's

refusal to violate the law, as expressed in a statute or

municipal regulation.

Id. at 34.

After Adams, the D.C. Court of Appeals resisted further

expansion of the public policy exception to the at-will employment doctrine. See, e.g, Gray v. Citizens Bank of Washington, 602 A.2d 1096 (D.C. 1991), reh'g en banc granted and

opinion vacated, id. at 1102, opinion reinstated on denial of

reh'g en banc, 609 A.2d 1143 (D.C. 1992). In Gray, a bank

employee alleged that he was fired after reporting to his

superior evidence of illegal activities by other employees. Id.

at 1096. The court held that Gray did not fall within Adams'

narrow public policy exception to the at-will employment

doctrine, and declined to expand the scope of possible exceptions. A cause of action for wrongful discharge would lie only

where the employee refuses to violate a specific law and the

employer puts to the employee the choice of breaking the law

or losing his job. Although the court initially granted rehearing en banc, it ultimately declined reconsideration. Similarly,

in Thigpen v. Greenpeace, Inc., 657 A.2d 770, 771 (D.C. 1995),

the D.C. Court of Appeals declined to expand Adams' narrow

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exception where an employee, somewhat like Liberatore,

communicated with his superiors and filed a complaint with

the District authorities about his employers' alleged violation

of the minimum wage law, but "continued to work as before

and did not refuse to carry out any instructions from his

employer." This was the state of the District of Columbia

law when the district court granted summary judgment in the

instant case.

During the pendency of Liberatore's appeal, however, the

D.C. Court of Appeals decided in Carl, 702 A.2d 159, that an

expansion of the public policy exception was warranted even

in the absence of a refusal by an employee to violate the law.

In Carl, the at-will employee, a nurse, alleged inter alia, that

she was wrongfully discharged in retaliation for testifying

before the Council of the District of Columbia on proposed

tort reform legislation, taking a position that advocated patients' rights adverse to the interests of her employer. Id. at

160. Her employer claimed she was fired for failing to meet

orientation requirements for probationary employees. See id.

D.C. Code s 1-224 makes it unlawful to intimidate or impede

a witness in any proceeding before the D.C. Council. Because the employee alleged she was discharged in retaliation

for her testimony before the D.C. Council, the court held that

the public policy embodied in s 1-224 warranted expansion of

the exception to the at-will employment doctrine. At the time

Liberatore's appeal was argued in this court, it was unclear,

however, whether as a matter of District of Columbia law,

Carl was retroactive. That question was decided by the D.C.

Court of Appeals in Washington, 718 A.2d 1071.

In Washington, a cafeteria employee alleged that she was

discharged in retaliation for following the District of Columbia health laws. After Washington, a cook in a retirement

home, told a fellow worker to stop spraying poisonous cleaning fluid next to uncovered food, she alleged that the manager

told her he had ordered the employee to clean the area, and

for her to tell the employee otherwise constituted insubordination. See id. at 1072. Because the conduct at issue had

occurred prior to Carl, the court had to decide whether Carl

would be retroactive. In concluding that it would, the court

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applied Mendes v. Johnson, 389 A.2d 781 (D.C. 1978) (en

banc), pretermitting a determination of whether Mendes was

implicitly overruled by the Supreme Court in James B. Beam

Distilling Co. v. Georgia, 501 U.S. 529 (1991), and Harper v.

Virginia Department of Taxation, 509 U.S. 86 (1993). Under

Mendes, the court considers four factors in determining

whether to apply a new civil rule retroactively: the extent of

the parties' reliance on the old precedent, the avoidance of

altering vested contract or property rights, the desire to

reward plaintiffs seeking to initiate just changes in the law,

and the fear of burdening the administration of justice by

disturbing decisions reached under the overruled precedent.

389 A.2d at 789.

In Washington, the court concluded that the employer's

stated reason for firing Washington belied any notion of

actual reliance on the narrow public policy exception announced in Adams, and that in general, neither employers

nor the public could reasonably have relied on the Adams

standard because the court had never explicitly held that

there was only one narrow public policy exception. 718 A.2d

at 1076-77. The court took note of the expanded public

policy exception in other jurisdictions6 and supervening Supreme Court decisions on the retroactivity of new civil rules

in Beam Distilling, 501 U.S. 529, and Harper, 509 U.S. 86,

and concluded that it gave employers fair warning of the

retroactive application of any expansion of the public policy

exception. Washington, 718 A.2d at 1078. The employer

cited no authority for a vested right to discharge an at-will

employee, and the court was unpersuaded that an employer's

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6 See id. at 1079 (citing Bernstein v. Aetna Life & Cas., 843

F.2d 359, 363-64 (9th Cir. 1988) (applying Arizona law); Newman v.

Emerson Radio Corp., 772 P.2d 1059, 1062-72 (Ca. 1989); Martin

Marietta Corp. v. Lorenz, 823 P.2d 100, 110-14 (Colo. 1992); McGehee v. Florafax Int'l , 776 P.2d 852, 853-54 (Okla. 1989)); id. at 1077

(citing 82 Am. Jur. 2d on Wrongful Discharge s 15, at 688 (1992),

noting that courts generally protect three categories of protected

employee conduct: (1) exercising a statutory right or civil obligation, (2) refusing to engage in illegal activity, and (3) reporting

criminal conduct to supervisors or outside agencies)).

expectation that the public policy exception would remain

limited, as announced in Adams, created such a right. See id.

Noting that Washington had not brought her lawsuit to effect

a change in the law, the third Mendes factor did not weigh in

her favor. On the other hand, the court rejected the notion

that applying Carl retroactively would result in a plethora of

wrongful discharge lawsuits. Id. at 1079.

Melville's contentions that Carl should not apply to Liberatore's case are unpersuasive. As in Washington, the employer's stated reason for firing was Liberatore's lapsed license,

thereby belying actual reliance on the narrower public policy

exception announced in Adams. 718 A.2d at 1076. The D.C.

Court of Appeals in Washington rejected the argument that

Carl broke completely new ground and was not foreshadowed

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by any prior holdings. Id. at 1077-78. Any reliance on the

old at-will employment doctrine fails the reasonable reliance

test, the D.C. Court of Appeals concluded, in light of Adams,

the law in other jurisdictions, and the supervening Supreme

Court decisions on retroactivity. Id. To no more avail is a

contention based on the burden on the administration of

justice, for as the Washington court noted, there is nothing of

record to suggest that a substantial number of pending

appeals would be subject to being reopened. Id. at 1078-79.

Consequently, we conclude that the grant of summary

judgment for failure to state a cause of action within the

public policy exception must be reversed. Although there

was no agreement by the D.C. Court of Appeals in Carl about

the nature of the conduct that would qualify under its expanded public policy exception, the separate views of the judges

indicate that "the effective holding of the en banc court," 702

A.2d at 197 n.2 (Steadman, J. dissenting), is that circumstances other than an employee's outright refusal to violate a

law constitute grounds for a public policy exception if "solidly

based on a statute or regulation that reflects the particular

public policy to be applied." Id. at 163; see also id. at 164 n.6

(Terry, J).

In his brief, Liberatore cites both federal and District of

Columbia law proscribing the improper storage of drugs.

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The FDA regulations require the storage of drug products

under appropriate conditions of temperature, humidity, and

light so that the identity, strength, quality, and purity of the

drugs products are not affected. 21 C.F.R. s 211.142(b).

Failure to comply results in adulterated drugs as defined by

Section 501 of the Food, Drug, and Cosmetic Act, 21 U.S.C.

s 351, see 21 C.F.R. s 210.1(b), and the violator is subject to

a fine, imprisonment up to one year, or both. 21 C.F.R.

s 333(a)(1). Under D.C. Code s 2-2013(a) (1981), "[d]rugs

which may deteriorate shall at all times be stored under

conditions specified on the label of the original container and

in accordance with applicable District of Columbia or federal

laws or regulations."

The conduct that Liberatore claims resulted in his termination implicates the public policy underlying the legal proscriptions on the storage and handling of drugs. On numerous occasions, Liberatore notified management of the

temperature control problems in the pharmacy, and when

the problems continued, he threatened to alert the FDA.

His claim that he was discharged for his threat to report

conditions to the FDA that were in violation of federal and

District of Columbia laws protecting the public from the

purchase of adulterated drugs implicates the kind of public

policy embodied in a statute or regulation underlying the

D.C. Court of Appeals' decision in Carl to expand Adams'

narrow exception to the at-will employment doctrine. See

702 A.2d 164-65; Washington, 718 A.2d at 1080.

Contrary to the Melville's contentions, neither Adams nor

its progeny indicates that the D.C. Court of Appeals would

draw a distinction between a threat and an actual complaint

to the appropriate enforcement official. In Washington, the

employee did not threaten to notify health authorities but

simply informed management of the alleged law violations.

See 718 A.2d at 1072; cf. Adler v. American Standard Corp.,

538 F. Supp. 572, 577-80 (D. Md. 1982); Sheets v. Teddy's

Frosted Foods, Inc., 427 A.2d 385, 388 (Conn. 1980);

McQuary v. Bel Air Convalescent Home, Inc., 684 P.2d 21,

22-23, 24 (Or. Ct. App. 1984). In other cases cited by

Melville, the employee simply disagreed with management

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decisions and did not allege a violation of law or action

contrary to public policy.7 Were the court to agree that

discharges from employment in retaliation for internal complaints of law violations are not protected by the public policy

exception, it would "create perverse incentives by inviting

concerned employees to bypass internal channels altogether

and immediately summon the police." Belline v. K-Mart

Corp., 940 F.2d 184, 187 (7th Cir. 1991).

Nor is there authority to support the proposition that

Liberatore has failed to state a cause of action because he

violated the same drug safety standards that are the basis of

his alleged wrongful discharge. Liberatore's violation does

not excuse the employer's like failure, itself an independent

violation of the public policy underlying the legal proscriptions, much less permit retaliatory discharges. The contention that Liberatore was properly discharged for jeopardizing

the employer's interests is a question of disputed fact, and

hence, summary judgment on that basis would be inappropriate. Melville's reliance on Korb v. Raytheon Corp., 574

N.E.2d 370 (Mass. 1991), involving a lobbyist who spoke to

the press against his employer's interest in greater defense

spending, is misplaced because Liberatore's duties as a manager of the pharmacy department were neither incompatible

with the employer's interests nor such as to preclude him

from complaining about temperature control problems in the

pharmacy.

Accordingly, because the complaint states a cause of action

for wrongful discharge under the expanded public policy

exception to the at-will employment doctrine recognized by

the D.C. Court of Appeals in Carl, and there remains a

genuine issue of material fact as to the employer's stated

__________

7 See Suchodolski v. Michigan Consol. Gas Co., 316 N.W.2d

710, 711-12 (Mich. 1982); Pierce v. Ortho Pharm. Corp., 417 A.2d

505, 513-14 (N.J. 1980); DeVries v. McNeil Consumer Prod. Co.,

593 A.2d 819, 825-27 (N.J. Super. Ct. App. Div. 1991); House v.

Carter-Wallace, Inc., 556 A.2d 353, 356 (N.J. Super. Ct. App. Div.

1989); Jones v. Gilstrap, 343 S.E.2d 646, 646-49 (S.C. Ct. App.

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reason for Liberatore's discharge, we reverse the grant of

summary judgment.

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1986); cf. Mello v. Stop & Shop Cos., 524 N.E.2d 105, 106-08 (Mass.

1988).

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