Court Opinion

ID: 2763450
Source: CourtListenerOpinion
Date Created: 2014-12-22 16:06:23.683334+00
Date Added: 2024-06-11T11:27:15.363283
License: Public Domain

dismiss McManus's claims for a failure to state a claim, which the district
                court granted. McManus now appeals. The issue on appeal is whether the
                district court erred by dismissing McManus's tortious discharge claim. 2
                The district court correctly dismissed McManus's tortious discharge claim
                            In our de novo review of the district court's order dismissing a
                claim, "[we] will recognize all factual allegations in [a plaintiffs] complaint
                as true and draw all inferences in its favor." Buzz Stew, LLC v. City of N.
                Las Vegas, 124 Nev. 224, 228, 181 P.3d 670, 672 (2008).
                            "[A]ll employees in Nevada are presumptively at-will
                employees" and their "employment can be terminated without liability by
                either the employer or the employee at any time and for any reason or no
                reason' unless the termination violates "strong public policy.       Martin v.
                Sears, Roebuck & Co., 111 Nev. 923, 926-27, 899 P.2d 551, 553-54 (1995).
                "Terminating an employee for reasons which violate public policy gives
                rise to an action for tortious discharge."    Wayment v. Holmes,      112 Nev.
232, 236, 912 P.2d 816, 818 (1996). Nevada recognizes two strong public
                policies limiting an employer's ability to terminate an employee that are
                relevant here: (1) protecting an employee who reports illegal activity to
                outside authorities, Wiltsie v. Baby Grand Corp., 105 Nev. 291, 293, 774
P.2d 432, 433 (1989), and (2) protecting an employee who refuses to
                participate in conduct the employee reasonably believes is illegal.      Allum
                v. Valley Bank of Nev.,     114 Nev. 1313, 1323-24, 970 P.2d 1062, 1068
                (1998).

                      2 McManus   waived the issue of the dismissal of his intentional
                interference with contractual relations claim by not raising it in his
                opening brief. Powell v. Liberty Mitt. Fire Ins. Co., 127 Nev. , n.3,
                252 P.3d 668, 672 n.3 (2011) ("Issues not raised in an appellant's opening
                brief are deemed waived.").

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                       McManus failed to state a claim of tortious discharge for reporting
                       illegal conduct to outside authorities
                              McManus argues that because he reported the purportedly
                  illegal transaction to API's CEO, the chairman of its board, and its outside
                  legal counsel, he engaged in protected conducts
                              Nevada recognizes a strong public policy protecting an
                  employee who reports illegal conduct to outside authorities.     Wiltsie, 105
Nev. at 293, 774 P.2d at 433. However, this policy does not protect
                  internal reporting, as internal reporting serves an employer's private
                  interests and not a public purpose. Id.
                              Here, McManus alleged that he reported the suspected illegal
                  activity to three persons or entities: API's CEO, the chairman of its board,
                  and its outside legal counsel. Because the CEO and the chairman were
                  part of API, McManus's alleged reporting to them was unprotected
                  internal reporting. See id. at 293, 774 P.2d at 433-34.
                              Similarly, McManus failed to allege that his reporting of
                  illegal conduct to API's outside legal counsel is protected external
                  reporting, because he did not allege facts to suggest that outside legal
                  counsel was an appropriate authority which could enforce securities laws
                  against API.   See id.   Furthermore, McManus did not allege that API's
                  outside legal counsel was authorized to inform the government about the
                  alleged illegal conduct without API's permission, since he failed to allege
                  how his communications with API's outside counsel were outside of the
                  protection afforded API under its attorney-client privilege.   See Ward leigh

                        3 McManus's   argument that this court should overrule Wiltsie and
                  protect internal reporting is without merit because McManus fails to
                  present a compelling reason for his proposed change in law. See Miller v.
                  Burk, 124 Nev. 579, 597, 188 P.3d 1112, 1124 (2008) (holding that this
                  court will not overrule precedent absent a compelling reason to do so).

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                  v. Second Judicial Dist. Court, 111 Nev. 345, 352, 891 P.2d 1180, 1184-85
                  (1995) (observing that an employer's attorney-client privilege protects an
                  employee's communications with the employer's attorneys); see also NRS
                  49.095(1) (codifying the attorney-client privilege). Because McManus did
                  not allege that he engaged in protected external reporting, the district
                  court did not err by dismissing his claim with regard to this theory.
                        McManus failed to state a claim for tortious discharge based on a
                        refusal to participate in illegal conduct
                               McManus alleged that he was tortiously discharged for
                  refusing to participate in a securities transaction that he reasonably
                  believed to be illegal. Though McManus did not expressly state in his
                  complaint that he signed API's SEC filing, he admitted at oral argument
                  that he signed it. He alleges that he did so to avoid being fired. 4
                               Tortious discharge can occur when an employee "was
                  terminated for refusing to engage in conduct that he, in good faith,
                  reasonably believed to be illegal." Allum, 114 Nev. at 1324, 970 P.2d at
                  1068. If an employee actually participated in the purported illegal
                  activity, however, the protection afforded by this public policy does not
                  apply. See Schlang v. Key Airlines, Inc., 794 F. Supp. 1493, 1506-07 (D.
                  Nev. 1992), vacated in part on other grounds, 158 F.R.D. 666, 671 (D. Nev.
                  1994).
                               Here, McManus conceded that he participated in the illegal
                  activity because he signed API's SEC filing. Thus, McManus failed to

                           4McManus contended at oral argument that the purported illegal
                  activity he refused to participate in also involved recommending the
                  transaction to API's board of directors. However, he did not allege in his
                  complaint that this was the illegal activity in which he refused to
                  participate and that led to his termination. Thus, his purported refusal to
                  recommend the transaction does not prevent the dismissal of this claim.

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                   state a claim for tortious discharge based on the refusal to participate in
                   an illegal activity. 5 Therefore, the district court did not err by dismissing
                   McManus's tortious discharge claim with regard to this theory.
                   Conclusion
                                McManus failed to state a claim for tortious discharge because
                   he did not allege that he was terminated for externally reporting illegal
                   activity or for refusing to participate in illegal activity. Thus, the district
                   court did not err in dismissing his claim. Therefore, we
                                ORDER the judgment of the district court AFFIRMED.

                                                                                         J.

                                                                                         J.
                                                        Parraguirr,e

                                                                                         J.
                                                        Saitta

                   cc: Hon. David A. Hardy, District Judge
                        Wm. Patterson Cashill, Settlement Judge
                        Cavanaugh-Bill Law Offices, LLC
                        Laxalt & Nomura, Ltd./Reno
                        Washoe District Court Clerk

                         5 SinceMcManus concedes that he participated in the illegal activity,
                   we do not address whether he alleged a reasonable belief that the activity
                   was illegal. Furthermore, we do not address whether issue preclusion
                   prevents McManus from stating a tortious discharge claim.

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