Court Opinion

ID: 176416
Source: CourtListenerOpinion
Date Created: 2010-10-01 19:48:08+00
Date Added: 2024-06-11T17:25:38.610030
License: Public Domain

NOT PRECEDENTIAL

                       UNITED STATES COURT OF APPEALS
                            FOR THE THIRD CIRCUIT

                                       No. 09-4315

                            CATHERINE A. SPYRIDAKIS,
                                               Appellant

                                             v.

                             THE RIESLING GROUP, INC.,
                                d/b/a CE Credits Online

                       Appeal from the United States District Court
                         for the Eastern District of Pennsylvania
                                (D.C. 2:09-cv-01545-WY)
                       District Judge: Honorable William H. Yohn

                       Submitted Under Third Circuit LAR 34.1(a)
                                    July 16, 2010
                  Before: FUENTES and VANASKIE, Circuit Judges,
                          and DITTER,* Senior District Judge

                                 (Filed: October 1, 2010)

                               OPINION OF THE COURT

VANASKIE, Circuit Judge.

       *
        Honorable J. William Ditter, Jr., Senior District Judge for the United States
District Court for the Eastern District of Pennsylvania, sitting by designation.
       In this case of alleged violations of sections 5 and 10 of Pennsylvania’s Wage

Payment and Collection Law (“WPCL”), 43 Pa. Stat. §§ 260.5 and 260.10, and wrongful

termination, Catherine Spyridakis appeals the order of the District Court granting the

motion to dismiss filed by The Riesling Group, doing business as CE Credits Online

(“CEC”). For the reasons that follow, we will affirm.

                                             I.

       As we write only for the parties, who are familiar with the facts and procedural

history of this case, we will set forth only those facts necessary to our analysis. CEC

retained Spyridakis as a part-time online teaching assistant in June of 2004. Spyridakis

signed an Agreement and Fee Schedule providing, among other things, that she was an

independent contractor, that she agreed to CEC’s guidelines concerning her work,

invoicing, and compensation, and that either party could terminate the agreement at will.

       After performing her job duties for some time, Spyridakis came to believe that

CEC exercised enough control over her work that she was truly an employee, not an

independent contractor. Seeking clarification of her employment status for tax purposes,

Spyridakis described her work to the Pennsylvania Department of Labor and Industry,

Office of Unemployment Compensation Tax Services, Bureau of Employer Tax

Operations (“Tax Bureau”). In the course of its subsequent investigation, the Tax Bureau

contacted CEC around July or early August of 2006. CEC terminated Spyridakis on

August 11, 2006. CEC also withheld payment on Spyridakis’s final two invoices for

                                             2
more than five months.

      Soon after Spyridakis’s termination, the Tax Bureau determined that she had been

an employee, not an independent contractor. Spyridakis then applied for and received

unemployment benefits. CEC appealed the award of unemployment compensation on the

ground that Spyridakis had been an independent contractor who was ineligible for

benefits. Three separate administrative bodies agreed, however, that Spyridakis was an

employee. First, the Pennsylvania Department of Labor and Industry, Bureau of

Unemployment Compensation Benefits and Allowances (“Benefits Bureau”) found that

Spyridakis was an employee eligible for benefits. Second, a Department of Labor and

Industry Referee affirmed the Benefits Bureau’s decision. Third, the Unemployment

Compensation Board of Review (“Board”) affirmed the Referee’s decision.

      CEC appealed the Board’s decision to the Commonwealth Court of Pennsylvania.

Spyridakis participated in the proceedings before the Commonwealth Court as an

intervenor. She was represented by counsel, who submitted a brief in support of

affirmance of the Board’s determination that Spyridakis was an employee. The

Commonwealth Court, observing that the extensive record included more than 300 pages

of documents offered by Spyridakis and the testimony from two hearings, concluded that

the Board’s finding was wrong and reversed the award of unemployment benefits. C E

Credits Online v. Unemployment Comp. Bd. of Review, 946 A.2d 1162, 1164-65, 1170

(Pa. Commw. 2008). Spyridakis, through counsel, filed a petition for allowance of appeal

                                           3
to the Pennsylvania Supreme Court, which was denied. C E Credits Online v.

Unemployment Comp. Bd. of Review, 971 A.2d 493 (Pa. 2009).

       Following the Commonwealth Court’s ruling, Spyridakis brought this action. Her

complaint, filed in the Philadelphia Court of Common Pleas, contained four counts: (1)

wrongful discharge in violation of public policy, (2) breach of contractual duty of good

faith and fair dealing, (3) violations of the WPCL, 43 Pa. Stat. §§ 260.5 and 260.10, and

(4) breach of contract arising from unpaid invoices for services rendered. CEC removed

the action to the United States District Court for the Eastern District of Pennsylvania on

the basis of diversity of citizenship and subsequently moved to dismiss. The District

Court, finding that the Pennsylvania Commonwealth Court’s determination that

Spyridakis was not an employee of CEC was entitled to preclusive effect, dismissed the

WPCL claim as that legislation applies only to employees. Spyridakis v. Riesling Group,

Inc., Civil Action No. 09-1545, 2009 WL 3209478, at *7 (E.D. Pa. Oct. 6, 2009).

Finding that the termination of the agreement did not violate public policy, the District

Court dismissed the claims of wrongful discharge and breach of the covenant of good

faith and fair dealing. Finally, the District Court exercised its discretion under 28 U.S.C.

§ 1367(c)(3) not to exert supplemental jurisdiction over the breach of contract claim for

unpaid invoices, remanding the claim to the Philadelphia Court of Common Pleas.

Spyridakis, 2009 WL 3209478, at *13.

                                             II.

                                              4
       We have jurisdiction over the District Court’s dismissal order pursuant to 28

U.S.C. § 1291. See Hudson United Bank v. LiTenda Mortg. Corp., 142 F.3d 151, 155 (3d

Cir. 1998) (“[A] dismissal order preceding a § 1367(c) remand order is reviewable by

direct appeal pursuant to 28 U.S.C. § 1291.”) (citation omitted). We exercise plenary

review over the District Court’s application of issue preclusion. See Jean Alexander

Cosmetics, Inc. v. L’Oreal USA, Inc., 458 F.3d 244, 248 (3d Cir. 2006). We also review

de novo the District Court’s dismissal of Spyridakis’s claims under Rule 12(b)(6). See

Max v. Republican Comm. of Lancaster County, 587 F.3d 198, 200 (3d Cir. 2009). We

accept Spyridakis’s factual allegations as true and draw all reasonable inferences in her

favor. See id.

                                              A.

       Federal law provides that state court judgments “shall have the same full faith and

credit in every court within the United States . . . as they have by law or usage in the

courts of such State . . . from which they are taken.” 28 U.S.C. § 1738. This statute

“directs federal courts considering the preclusive effect of another jurisdiction’s prior

judgment to look not to federal preclusion law or practice but to what the other

jurisdiction would decide regarding its preclusive effect.” Del. River Port Auth. v.

Fraternal Order of Police, 290 F.3d 567, 573 (3d Cir. 2002). Accordingly, we look to

Pennsylvania law to assess the preclusive effect of the Commonwealth Court’s judgment.

                                              5
       In Pennsylvania, issue preclusion applies if:

       (1) the issue decided in the prior case is identical to the one presented in the
       later action;
       (2) there was a final adjudication on the merits;
       (3) the party against whom the plea is asserted was a party or in privity with
       a party in the prior case;
       (4) the party or person privy to the party against whom the doctrine is
       asserted had a full and fair opportunity to litigate the issue in the prior
       proceeding; and
       (5) the determination in the prior proceeding was essential to the judgment.

Office of Disciplinary Counsel v. Kiesewetter, 889 A.2d 47, 50-51 (Pa. 2005).

       The District Court found that each of these factors was satisfied in this case. We

agree. At issue in the unemployment compensation proceeding and central to the WPCL

claims asserted in this matter is whether Spyridakis was an employee of CEC. There was

a final adjudication of this issue in the state court proceedings, Spyridakis was a party in

the state court matter, there was a full opportunity to litigate the issue, and the

determination of whether Spyridakis was an employee or an independent contractor was

essential to the state court judgment.

       Spyridakis argues that issue preclusion should not apply because she did not have

“a full and fair opportunity to litigate” her employment status in the unemployment

compensation proceedings. She relies on Rue v. K-Mart Corp., 713 A.2d 82 (Pa. 1998),

to support her assertion that decisions arising from unemployment compensation

proceedings do not have a preclusive effect in subsequent cases.

       In Rue, the Pennsylvania Supreme Court held that an unemployment compensation

                                               6
referee’s factual finding did not give rise to issue preclusion in the employee’s subsequent

defamation action against her employer. Id. at 86-87. The court emphasized the

procedural differences between proceedings before a referee and those before a court of

record. The court concluded that “[t]he substantial procedural and economic disparities

between unemployment compensation proceedings and later civil proceedings negate the

preclusive effect of a Referee’s factual findings.” Id.

       As the District Court recognized, Rue is plainly distinguishable. The present case

concerns the preclusive effect of a decision by a Pennsylvania court on a question of law,

not a decision by an unemployment compensation referee on a question of fact. When

she was before the Commonwealth Court, Spyridakis was represented by counsel, and the

Commonwealth Court considered an extensive record. After an unfavorable decision in

the Commonwealth Court, Spyridakis petitioned for review by the Pennsylvania Supreme

Court. Moreover, unlike the employer in Rue, Spyridakis had every incentive to litigate

her case vigorously in her unemployment compensation proceedings. These

considerations support the District Court’s conclusion that Spyridakis did, in fact, have a

“full and fair opportunity to litigate” her employment status. See Magoni-Detwiler v.

Pennsylvania, 502 F. Supp. 2d 468, 475-76 (E.D. Pa. 2007) (noting that representation by

counsel, extensive briefing, presentation of evidence, and petition for review by the

Pennsylvania Supreme Court compelled conclusion that plaintiff had received a full and

fair opportunity to litigate her claim arising out of unemployment compensation

                                             7
proceedings).

       Spyridakis argues that the Commonwealth Court’s appellate review of the

administrative unemployment compensation proceedings does not support the application

of issue preclusion. She cites Kelley v. TYK Refractories Co., 860 F.2d 1188 (3d Cir.

1988), to support this assertion. Kelley, however, did not hold that the standard of

appellate review in unemployment compensation proceedings precludes an opportunity

for a full and fair adjudication of the issue of law under consideration in the subsequent

action. Instead, it referenced the reviewing court’s deference to the administrative

agency’s findings of fact in concluding that a ruling adverse to the employee in the

unemployment compensation proceedings was not entitled to preclusive effect in a

subsequent case asserting race discrimination claims. Id. at 1197-98. Kelley turned on

the fact that the questions of fact presented in the unemployment compensation

proceedings were not identical to the factual issues presented in the subsequent civil

rights action. Id. at 1195-96. By way of contrast, the issue of law in this case is identical

to the question of law decided by the Commonwealth Court in the unemployment

compensation proceedings. Therefore, Kelley does not support Spyridakis’s position.

       The WPCL applies only to employees, not to independent contractors. See Morin

v. Brassington, 871 A.2d 844, 850 (Pa. Super. Ct. 2005). Because the Commonwealth

Court’s determination that Spyridakis was not an employee must be accorded preclusive

effect, the District Court properly dismissed Spyridakis’s WPCL claims.

                                              8
                                             B.

       Next, we consider Spyridakis’s claim for wrongful discharge in violation of public

policy. As a preliminary matter, it is not apparent that Pennsylvania would recognize an

independent contractor’s claim for wrongful discharge. CEC points out that no

Pennsylvania case has extended this cause of action to independent contractors, nor are

we aware of any such case. Nonetheless, like the District Court, we will assume, without

deciding, that Spyridakis could pursue a claim for wrongful discharge. We concur with

the District Court’s determination that Spyridakis has failed to identify a clear mandate of

public policy that was undermined by CEC’s alleged conduct.

       In Pennsylvania, “as a general rule, there is no common law cause of action against

an employer for termination of an at-will employment relationship.” Weaver v. Harpster,

975 A.2d 555, 562 (Pa. 2009). “Exceptions to this rule have been recognized in only the

most limited of circumstances, where discharges of at-will employees would threaten

clear mandates of public policy.” Clay v. Advanced Computer Applications, Inc., 559

A.2d 917, 918 (Pa. 1989). To determine Pennsylvania public policy, courts look to the

Commonwealth’s “Constitution, court decisions, and statutes.” Weaver, 975 A.2d at 563.

We have previously observed that “Pennsylvania courts have construed the public policy

exception to at-will employment narrowly, lest the exception swallow the general rule.”

Fraser v. Nationwide Mut. Ins. Co., 352 F.3d 107, 111 (3d Cir. 2003).

       In Fraser, we observed that, although the perimeters of the narrow public policy

                                             9
exception have not been precisely defined, there appear to be “three limited circumstances

in which public policy will trump employment at-will.” Id. Quoting Hennessy v.

Santiago, 708 A.2d 1269, 1273 (Pa. Super. Ct. 1998), we described those circumstances

as follows:

       “[A]n employer (1) cannot require an employee to commit a crime [and fire
       the employee for refusing to do so], (2) cannot prevent an employee from
       complying with a statutorily imposed duty, and (3) cannot discharge an
       employee when specifically prohibited from doing so by statute.”

Fraser, 352 F.3d at 111. None of those circumstances is present here.

       Spyridakis argues that CEC contravened public policy by terminating her

employment for reporting to the government unlawful conduct, i.e., misclassifying her as

an independent contractor when she was truly an employee. Even if we accept that

Spyridakis was motivated by a desire to report conduct she deemed unlawful, she points

to no authority that she was under a legal duty to do so. Moreover, as the District Court

found in this case, Fraser precludes a wrongful discharge claim based upon a plaintiff

reporting alleged wrongful or illegal activity. Fraser, 352 F.3d at 112 (“Pennsylvania

courts ‘have repeatedly rejected claims that a private employer [as opposed to a public

employer] violated public policy by firing an employee for whistleblowing, when the

employee was under no legal duty to report the acts at issue.’”) (quoting Donahue v. Fed.

Express Corp., 753 A.2d 238, 244 (Pa. Super. Ct. 2000)).

       Spyridakis also argues that CEC violated Pennsylvania public policy by

terminating her for attempting to determine CEC’s and her own tax obligations. To

                                            10
bolster her argument that the Commonwealth’s public policy supports her right or duty to

verify tax burdens, Spyridakis cites to statutes requiring employers to withhold income

tax, 72 Pa. Cons. Stat. § 7316, and to contribute to the Pennsylvania unemployment

compensation fund, 43 Pa. Cons. Stat. § 781(a)(1). These statutes, however, are silent

with respect to an employee’s rights or obligations and do not create a “clear mandate of

public policy” that is relevant to Spyridakis’s case. “Where the termination has not

implicated a clear mandate of public policy, [Pennsylvania Courts] have not permitted a

common law cause of action for wrongful discharge.” Weaver, 975 A.2d at 564.

Accordingly, Spyridakis’s wrongful discharge claim on this ground fails as well.

       For similar reasons, we must reject Spyridakis’s argument that her termination

implicates a third public policy, the “interests embodied in the tax and employment laws.”

(Appellant’s Br. at 41.) Spyridakis cites to a section of the WPCL, 43 Pa. Cons. Stat.

§ 260.9a(a), a section of the unemployment compensation statute, 43 Pa. Cons. Stat. §

801, and a section of the workers’ compensation statute, 77 Pa. Cons. Stat. § 431, to

support this argument. She does not, however, explain how these statutes create a clear

mandate of public policy that was implicated by her termination.

       Therefore, we will affirm the District Court’s dismissal of her wrongful

termination claim. Moreover, because a plaintiff “cannot as a matter of law maintain an

action for breach of the implied duty of good faith and fair dealing, insofar as the

underlying claim is for termination of an at-will employment relationship,” Donahue, 753

                                             11
A.2d at 243 (Pa. Super. Ct. 2000), we will also affirm the dismissal of the claim for

breach of the contractual duty of good faith and fair dealing.

                                            III.

       Having determined that the District Court properly dismissed Spyridakis’s claims

under the WPCL, for wrongful discharge, and breach of the duty of good faith, and

finding no abuse of discretion in the decision to remand the remaining breach of contract

claim, we will affirm the judgment of the District Court.

                                             12