Court Opinion

ID: 2789797
Source: CourtListenerOpinion
Date Created: 2015-03-27 19:09:53.476159+00
Date Added: 2024-06-11T11:10:04.543773
License: Public Domain

IN THE SUPREME COURT OF TENNESSEE
                              AT JACKSON
                                November 5, 2014 Session

               CHARLES HAYNES v. FORMAC STABLES, INC.

          Appeal by Permission from the Court of Appeals, Western Section
                         Circuit Court for Obion County
                    No. CC10CV204      William B. Acree, Judge

                 No. W2013-00535-SC-R11-CV - Filed March 27, 2015

The plaintiff asserted claims for retaliatory discharge pursuant to both the common law and
the Tennessee Public Protection Act, alleging that the owner of the employer had engaged
in illegal conduct and had terminated the plaintiff’s employment when he acted as a
whistleblower by complaining of the conduct to the owner. The trial court dismissed the
plaintiff’s claims because, according to his own allegations, he had not reported the illegal
activity to anyone other than the person responsible for the activity. The Court of Appeals
affirmed. We hold that an employee must report an employer’s wrongdoing to someone
other than the wrongdoer to qualify as a whistleblower, which may require reporting to an
outside entity when the wrongdoer is the manager, owner, or highest ranking officer within
the company. The judgment of the Court of Appeals is affirmed.

    Tenn. R. App. P. 11 Appeal by Permission; Judgment of the Court of Appeals
                                     Affirmed

G ARY R. W ADE, J., delivered the opinion of the Court, in which S HARON G. L EE, C.J., and
C ORNELIA A. C LARK and J EFFREY S. B IVINS, JJ., joined. H OLLY K IRBY, J., not participating.

Justin S. Gilbert, Chattanooga, Tennessee; Jonathan L. Bobbitt, Brentwood, Tennessee; and
Jessica F. Salonus, Jackson, Tennessee, for the appellant, Charles Haynes.

James M. Glasgow Jr., Union City, Tennessee; Timothy R. Holton, Memphis, Tennessee; and
Michael P. McGartland and Eugene E. Borchardt, Fort Worth, Texas, for the appellee,
Formac Stables, Inc.

Robert D. Myers, Ryan M. Skertich, and Brandon D. Pettes, Memphis, Tennessee, for the
amicus curiae, the Tennessee Defense Lawyers Association.
                                              OPINION

                             I. Facts and Procedural History
       Charles Haynes (the “Plaintiff”) worked as a horse groom for Formac Stables, Inc.
(“Formac”). After Formac terminated the Plaintiff’s employment in June of 2010, he filed
a complaint for retaliatory discharge pursuant to both the common law and the Tennessee
Public Protection Act (“TPPA”), Tenn. Code Ann. § 50-1-304 (2014). When Formac
responded by filing a motion to dismiss, the Plaintiff amended his complaint, alleging that
on April 3, 2010, during working hours, he suffered an injury to the head when kicked by a
Tennessee Walking Horse named “Bruce Pearl.” The Plaintiff maintained that he asked
Formac’s owner for permission to leave work so that he could seek appropriate medical
treatment.1 The owner refused, informing the Plaintiff that the only treatment he would allow
was for a veterinarian to seal the wound with horse sutures. According to the Plaintiff, the
owner explained to him that if he did not like that option, he could “find [him]self another
job.” The Plaintiff’s pleadings indicate that he submitted to the stitching procedure only
because he feared that he would otherwise lose his job.

        The Plaintiff alleged that during the three months following the incident he
complained to the owner of severe headaches caused by the lack of proper medical care. On
June 29, 2010, the owner terminated the Plaintiff, allegedly because of his refusal to remain
silent about the illegal stitching procedure.

       In response to the Plaintiff’s amended complaint, Formac again moved to dismiss,
arguing that the Plaintiff had failed to state a valid claim for retaliatory discharge because,
according to his own allegations, he had not reported the illegal activity to anyone other than
the owner. The trial court granted the motion to dismiss, and the Court of Appeals affirmed
the dismissal. Haynes v. Formac Stables, Inc., No. W2013-00535-COA-R3-CV, 2013 WL
6283717, at *6 (Tenn. Ct. App. Dec. 4, 2013). We granted review to address whether an
employee asserting a whistleblower claim of retaliatory discharge must report illegal activity
by his employer to someone other than the person responsible, even when that person is the
manager, owner, or highest ranking officer of the company. This is an issue of first
impression for this Court.

                                   II. Standard of Review
      In adjudicating a motion to dismiss pursuant to Tennessee Rule of Civil Procedure
12.02(6), a court must accept as true the factual allegations in the complaint and determine
whether those allegations state a claim upon which relief may be granted. Webb v. Nashville
Area Habitat for Humanity, Inc., 346 S.W.3d 422, 426 (Tenn. 2011). We conduct a de novo

       1
           The name of the owner does not appear in the pleadings.

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review of a dismissal pursuant to Rule 12.02(6), affording no presumption of correctness to
the ruling of the trial court. Phillips v. Montgomery Cnty., 442 S.W.3d 233, 237 (Tenn.
2014).

                                     III. Analysis
        The sole issue before us is whether the Plaintiff has stated a viable claim for
retaliatory discharge when he reported the illegal stitching procedure only to Formac’s
owner, who was primarily responsible for the conduct.

        In Tennessee, the employee–employer relationship is ordinarily governed by the
employment-at-will doctrine, “a long standing rule . . . which recognizes the concomitant
right of either the employer or the employee to terminate the employment relationship at any
time, for good cause, bad cause, or no cause at all, without being guilty of a legal wrong.”
Stein v. Davidson Hotel Co., 945 S.W.2d 714, 716 (Tenn. 1997). In Clanton v. Cain-Sloan
Co., this Court recognized an exception to the employment-at-will doctrine in the form of a
common law cause of action for retaliatory discharge. 677 S.W.2d 441, 445 (Tenn. 1984).
While the claim in Clanton concerned an allegation that the employer had discharged an
employee for filing a workers’ compensation claim, id. at 443, this Court later clarified that
an employee may recover for retaliatory discharge in a variety of different contexts by
establishing the following elements:

       (1) that an employment-at-will relationship existed; (2) that the employee was
       discharged[;] (3) that the reason for the discharge was that the employee
       attempted to exercise a statutory or constitutional right, or for any other reason
       which violates a clear public policy evidenced by an unambiguous
       constitutional, statutory, or regulatory provision; and (4) that a substantial
       factor in the employer’s decision to discharge the employee was the
       employee’s exercise of protected rights or compliance with clear public policy.

Crews v. Buckman Labs. Int’l, Inc., 78 S.W.3d 852, 862 (Tenn. 2002). One of the factual
scenarios that will support a common law cause of action for retaliatory discharge is when
an employee is discharged for refusing to remain silent about his employer’s illegal activity
or unsafe practices—commonly referred to as a “whistleblower” claim. Gossett v. Tractor
Supply Co., 320 S.W.3d 777, 787 (Tenn. 2010) (citing Anderson v. Standard Register Co.,
857 S.W.2d 555, 556 (Tenn. 1993)).

        Employees may also assert a whistleblower claim pursuant to the TPPA, which
provides, in pertinent part, that “[n]o employee shall be discharged or terminated solely . . .
for refusing to remain silent about[] illegal activities.” Tenn. Code Ann. § 50-1-304(b). The
primary difference in the statutory version of the cause of action is that it requires an

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employee to show that his or her refusal to remain silent was the sole reason for the
discharge, whereas a common law claimant must show only that his or her refusal to remain
silent was a substantial factor motivating the discharge. Guy v. Mut. of Omaha Ins. Co., 79
S.W.3d 528, 537 (Tenn. 2002).2

        To prevail on a whistleblower claim pursuant to the TPPA or at common law, an
employee must establish that he or she reported the employer’s illegal activity and that the
“reporting of the illegal activity furthered a clear public policy.” Gossett, 320 S.W.3d at
788.3 Over time, our courts have attempted to clarify what an employee must do to meet the
reporting requirement. In Merryman v. Central Parking System, Inc., the Court of Appeals
held that an employee may report the illegal activity to an outside entity, such as a law
enforcement or regulatory agency, or may report internally to company management. No.
01A01-9203-CH-00076, 1992 WL 330404, at *7 (Tenn. Ct. App. Nov. 13, 1992), abrogated
on other grounds by Guy, 79 S.W.3d at 537, and Anderson, 857 S.W.2d at 556.4 The court
in Merryman concluded, however, that an employee cannot merely report the illegal activity
to the person responsible for the activity. 1992 WL 330404, at *7. Because Merryman had
not reported his employer’s illegal conduct to anyone other than the supervisor who was
responsible, the court held that he had “not become a ‘whistleblower’” and, therefore, could
not prevail on his retaliatory discharge claim. Id. Subsequent Court of Appeals decisions
have reaffirmed the rule that employees asserting whistleblower claims may report illegal
activity internally but must report to someone other than the person responsible for the
activity. See, e.g., Coleman v. Humane Soc’y of Memphis, No. W2012-02687-COA-R9-CV,
2014 WL 587010, at *24-26 (Tenn. Ct. App. Feb. 14, 2014); Collins v. AmSouth Bank, 241
S.W.3d 879, 885-86 (Tenn. Ct. App. 2007), overruled on other grounds by Gossett, 320
S.W.3d at 788.

        2
         In 2014, the General Assembly added the following provision to the TPPA: “This section abrogates
and supersedes the common law with respect to any claim that could have been brought under this section.”
Tenn. Code Ann. § 50-1-304(g). This provision “appl[ies] to all actions accruing on or after [July 1, 2014].”
Act of May 22, 2014, ch. 995, § 8, 2014-2 Tenn. Code Ann. Adv. Legis. Serv. 864, 865 (LexisNexis).
        3
           Tennessee law also recognizes a cause of action for retaliatory discharge based on an employee’s
refusal to participate in illegal activity, which does not require the employee to show any reporting of the
illegal activity. Id.
        4
          There is no bright-line rule regarding the outside entities to which an employee may report.
Depending upon the nature of the wrongdoing at issue, Tennessee courts have upheld claims by employees
who reported to various different authorities. See, e.g., Guy, 79 S.W.3d at 531 (employee reported insurance
fraud to Tennessee Department of Commerce and Insurance); Crews, 78 S.W.3d at 855 (employee reported
unauthorized practice of law to Board of Law Examiners); Mason v. Seaton, 942 S.W.2d 470, 471 (Tenn.
1997) (employee reported fire code violations and other dangerous conditions to “city fire and police
department”).

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       In Emerson v. Oak Ridge Research, Inc., the Eastern Section of the Court of Appeals
held that an employee had satisfied the reporting requirement by reporting an incident of
sexual harassment to the supervisor who subjected her to the harassment, who was the
manager of the company. 187 S.W.3d 364, 371 (Tenn. Ct. App. 2005). The court in
Emerson distinguished Merryman as follows:

        In Merryman, this [c]ourt ruled that simply reporting the behavior to the
        offending supervisor himself instead of reporting it to company management
        would not qualify the plaintiff as a whistleblower. In the case at bar, however,
        [the] plaintiff reported to both the offending supervisor and company
        management when she reported to [her supervisor], as he served in both
        capacities. Thus, Merryman is factually distinguishable.

Id. at 371 n.1. The court also noted that Emerson had reported her supervisor’s conduct to
an “outside entity” by contacting a local bar association “looking for an attorney because her
boss was sexually harassing her.” Id. at 371 n.2.5

        In contrast to Emerson, the Middle Section of the Court of Appeals held in Lawson
v. Adams that an employee did not qualify as a whistleblower because he had reported his
employer’s operation of unsafe trucks only to the owner, who was responsible for the unsafe
activity. 338 S.W.3d 486, 497 (Tenn. Ct. App. 2010). The Lawson opinion contains no
discussion of Emerson or whether the reporting was adequate in light of the offending party
being the company owner.

       In this case, the Western Section of the Court of Appeals rejected the Plaintiff’s
reliance on Emerson, ruling as follows:

                If Emerson had created the exception to Merryman that [the Plaintiff]
        contends it did, the exception clearly would have been applicable to Lawson.
        The Lawson court declined to recognize such an exception. When a plaintiff
        brings a claim based on his refusal to remain silent about illegal activity, the
        plaintiff must establish that he made “a report to some entity other than the
        person or persons engaging in the allegedly illegal activities.” [Lawson, 338
S.W.3d at 497 n.3 (quoting Collins, 241 S.W.3d at 885)]. [The Plaintiff’s]
        complaint does not establish that he reported the illegal activity to anyone
        other than Formac’s owner, who had allegedly engaged in it. We therefore

       5
          Judge D. Michael Swiney dissented from the Emerson majority’s analysis of the reporting issue,
concluding that “an employee must do something more than merely complain to the alleged harasser” to
qualify as a whistleblower. Id. at 382 (Swiney, J., concurring in part and dissenting in part).

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       affirm the trial court’s dismissal of [the Plaintiff’s amended] complaint for
       failure to state a claim.

Haynes, 2013 WL 6283717, at *6.

       As our discussion of these cases demonstrates, there is a split of authority within the
Court of Appeals pertaining to the reporting requirement for whistleblower claims. The
Eastern Section Panel in Emerson expressly distinguished Merryman and carved out an
exception for plaintiffs who report illegal activity to a single person who is both “the
offending supervisor and company management.” Emerson, 187 S.W.3d at 371 n.1. The
Middle Section Panel in Lawson and the Western Section Panel in this case did not recognize
the exception established in Emerson. Accordingly, we must decide whether to preserve the
exception established in Emerson or, in the alternative, to adopt a rule that uniformly requires
employees to report illegal activity to someone other than the offending party—which will
necessarily be an outside entity when, as here, the offending supervisor, the sole manager,
and the company owner are the same person.

        The Plaintiff contends that the Court of Appeals Panels in Lawson and in this case
erred by failing to recognize the ruling in Emerson that an employee may satisfy the reporting
requirement by reporting illegal activity to an offending supervisor when that supervisor is
also the manager, owner, or highest ranking officer in the company. The Plaintiff asserts that
to deny him whistleblower status would encourage managers and owners to claim that they
participated in illegal activity as a means of avoiding liability for retaliatory discharge. In
addition, the Plaintiff argues that disallowing internal reporting to an owner or manager
responsible for illegal conduct will require employees to report to outside authorities, which
will deprive employers of the opportunity to take corrective action.

        Formac emphasizes that whistleblower protection is available only to employees who
report illegal conduct in a manner that advances the public interest. Gossett, 320 S.W.3d at
788 (“The employee has no cause of action [as a whistleblower] unless the employee shows
that the reporting furthered some clear public interest.”). Formac contends that an employee
who reports only to the person responsible for the illegal conduct is acting in pursuit of a
private interest, thereby failing to expose the employer’s unlawful activity in furtherance of
the public interest.

       Formac’s position is supported by the case law of courts in other jurisdictions
addressing the same issue. In Fowler v. Criticare Home Health Services, Inc., the general
manager of the employer instructed Fowler, the employee, to ship a package containing
firearms and ammunition, and Fowler confronted the general manager about the illegality of
such a shipment. 10 P.3d 8, 15 (Kan. Ct. App. 2000). Affirming a summary judgment in

                                              -6-
favor of the employer, the Kansas Court of Appeals ruled as follows:

       [W]e are unpersuaded by Fowler’s argument that [the person he confronted]
       was the general manager, and that Fowler understood the initial directive to
       have come from [the general manager’s] boss, the owner of the company.
       There was nothing about the fact that Fowler worked for a smaller company
       that prevented him from reporting to law enforcement, if he felt company
       reporting avenues were closed to him. . . . A worker who wants to come under
       the protections of [the whistleblower cause of action] must seek out the
       intervention of a higher authority, either inside or outside of the company.

Id. at 15, aff’d, 26 P.3d 69 (Kan. 2001) (adopting the opinion of the Kansas Court of
Appeals). In another analogous case, Drummond v. Land Learning Foundation, the
employee confronted the owners of the employer, alleging that they had engaged in tax fraud.
358 S.W.3d 167, 169 (Mo. Ct. App. 2011). The Missouri Court of Appeals found that the
employee had not reported the illegal activity in a way that qualified him as a whistleblower:

       “[T]o effectuate the clear mandate of public policy implicated in a given
       situation, it is axiomatic that the at-will employee report or ‘blow the whistle’
       to the proper authorities, which, depending on the circumstances, would
       include the employer, ‘internal whistleblowing,’ and/or a third-party authority,
       ‘external whistleblowing.’” [Faust v. Ryder Commercial Leasing & Servs.,
       954 S.W.2d 383, 390-91 (Mo. Ct. App. 1997).] Internal reporting to superiors
       of illegal actions by other employees can constitute protected activity.
       However, a report of wrongdoing to the wrongdoer is insufficient to invoke the
       whistleblowing public policy exception. Reporting to the wrongdoer does not
       expose the wrongdoer or his wrongdoing and, thus, does not further the
       accepted clear mandate of public policy. If wrongdoing occurred, the
       wrongdoer necessarily knew of the misconduct already because he is the one
       that engaged in the misconduct and is not the person likely to remedy the
       wrong. While a report of wrongdoing to the wrongdoer may in some instances
       have the intended effect of stopping future criminal activity, it does not expose
       wrongdoers and their past wrongdoings in such a way as to remedy a public ill.
       Instead, “[i]t allows wrongdoers to escape detection and avoid prosecution for
       past wrongdoing, while in no way affording the victims an opportunity to
       protect themselves from further wrongdoing.” Faust, 954 S.W.2d at 391.
       Such is contrary to the clear mandate of public policy.

Drummond, 358 S.W.3d at 171 (citations omitted); see also Lykins v. CertainTeed Corp., 555
F. App’x 791, 794 (10th Cir. 2014) (holding that whistleblower status requires “reporting

                                              -7-
[illicit activity] to someone higher than the wrongdoer, either inside the company, if
available, or outside the company, when internal channels are unavailing”); Chipp v.
Salvation Army, No. B167508, 2004 WL 729216, at *4 (Cal. Ct. App. Apr. 6, 2004) (“[The
employee] failed to show that his employment was terminated in violation of public policy
because he did not show that he disclosed the alleged wrongdoing to anyone not participating
in the wrongful acts. . . . [The employee] therefore did not act as a whistle blower.”).

       As these authorities demonstrate, the public policy underlying the whistleblower
protections precludes relief for an employee who merely reports unlawful activity to the
person responsible, even when that person is the manager, owner, or highest authority within
the company. As we recognized in Guy,

       [U]nder both the statute and the common law, the plaintiff must assert that his
       or her whistleblowing activity “serves a public purpose [that] should be
       protected. So long as employees’ actions are not merely private or proprietary,
       but instead seek to further the public good, the decision to expose illegal or
       unsafe practices should be encouraged.”
79 S.W.3d at 537 n.4. (second emphasis added) (quoting Wagner v. City of Globe, 722 P.2d
250, 257 (Ariz. 1986)). When an employee reports wrongdoing only to the wrongdoer—who
is already aware of his or her own misconduct—there has been no exposure of the
employer’s illegal or unsafe practices. Such an employee necessarily fails to “blow the
whistle” in a meaningful fashion because the employee has made no “effort[] to bring to light
an illegal or unsafe practice.” Collins, 241 S.W.3d at 885 (emphasis added) (citing Guy, 79
S.W.3d at 537 n.4). We acknowledge that our decision will eliminate the option of internal
reporting under certain circumstances, such as when the wrongdoer is the manager, owner,
or highest authority within the company, as is the case here. As other courts have observed,
however, imposing liability for the discharge of a whistleblower is a narrow exception to the
employment-at-will doctrine and must be limited to situations in which an employee has
exposed the wrongful conduct of the employer in furtherance of the public interest, which
may require reporting to an outside agency in circumstances such as these. See, e.g., Fowler,
10 P.3d at 15; Drummond, 358 S.W.3d at 169.6

                                      IV. Conclusion
       Because the allegations in the Plaintiff’s amended complaint establish that he did not
expose Formac’s illegal conduct by reporting it to anyone aside from the person responsible
for the conduct, the Court of Appeals properly affirmed the dismissal of the amended

       6
           We overrule Emerson, 187 S.W.3d at 371 & n.1, to the extent that it is inconsistent with this
opinion.

                                                   -8-
complaint for failure to state a claim upon which relief may be granted. Costs of this appeal
are taxed to Charles Haynes and his surety, for which execution may issue if necessary.

                                                   _________________________________
                                                   GARY R. WADE, JUSTICE

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