Court Opinion

ID: 2644497
Source: CourtListenerOpinion
Date Created: 2013-11-30 01:01:12.948712+00
Date Added: 2024-06-11T09:02:08.151097
License: Public Domain

Notice: This opinion is subject to correction before publication in the P ACIFIC R EPORTER .
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                THE SUPREME COURT OF THE STATE OF ALASKA

MICHELE LYN BEACH,                                  )
                                                    )    Supreme Court No. S-14811
                       Appellant,                   )
                                                    )    Superior Court No. 3UN-10-00054 CI
       v.                                           )
                                                    )    OPINION
SONIA HANDFORTH-KOME,                               )
Individually, and ILIULIUK FAMILY                   )    No. 6845 - November 29, 2013
HEALTH SERVICES, INC.,                              )
                                                    )
                       Appellees.                   )
                                                    )

               Appeal from the Superior Court of the State of Alaska, Third
               Judicial District, Unalaska, Pat L. Douglass, Judge.

               Appearances: Joe P. Josephson, Josephson Law Offices,
               LLC, Anchorage, for Appellant. Elizabeth P. Hodes, Davis
               Wright Tremaine LLP, Anchorage, for Appellees.

               Before: Fabe, Chief Justice, Winfree, Stowers, Maassen, and
               Bolger, Justices.

               MAASSEN, Justice.

I.     INTRODUCTION
               Michele Beach was fired from her job at Iliuliuk Family and Health
Services, a health clinic, when the clinic’s executive director concluded that prescription
drug records had been systematically falsified and that Beach was responsible. Beach
sued the clinic and its executive director, alleging that they had breached the implied
covenant of good faith and fair dealing by conducting an unfair investigation and
unlawfully retaliating against Beach for her suggestions about improvements in the
clinic’s security systems.    The superior court granted summary judgment to the
defendants, and Beach appeals. We affirm.
II.    FACTS AND PROCEEDINGS
              In July 2008, Michele Beach was hired as a medical assistant at Iliuliuk
Family and Health Services, a family health clinic. In the months following her arrival,
Beach identified what she considered to be serious issues with the clinic’s handling of
prescription drugs, staffing, and necessary medical equipment, and she suggested
improvements in some of these areas to her supervisors.
              On December 18, 2008, a patient told the clinic’s Medical Director, Dr.
Heidi Baines, that she had bought Vicodin, a prescription narcotic drug, from a woman
who claimed to have obtained the pills from a clinic employee. Dr. Baines passed this
information on to the clinic’s Executive Director, Sonia Handforth-Kome. Handforth-
Kome left a message for the police “that we [probably have a] drug issue that we need[]
the police to investigate,” then met Dr. Baines at the clinic that evening after closing
time. The two of them began reviewing the records for July through October 2008, the
period that seemed relevant based on the patient’s report.
              The clinic’s dispensary records included “drug logs” maintained separately
for each narcotic drug, which identified among other things the patient, the date the drug
was dispensed, the dispensing health-care provider, the number of pills dispensed, and
the clinic employee who dispensed them. Clinic practice required that these logs be
cross-checked daily or almost daily by a tally of the pills still remaining in the clinic’s
inventory. Also relevant to the review were patients’ medical charts, which usually

                                           -2-                                       6845

included the provider’s notes about the number of pills that had been prescribed along
with a sticker signed by the employee who dispensed them, verifying the number; and
documents called “superbills,” which were detailed lists for each patient of all the
charges made to the patient and the patient’s insurer.
              In their review of these records for the drug Vicodin, Handforth-Kome and
Dr. Baines found a pattern of discrepancies, beginning in September 2008 and increasing
in frequency into December. They found that although the daily pill counts matched the
logs, the number of pills being dispensed for some patients was far in excess of those
being prescribed for and billed to those patients; in other cases there were records of pills
being dispensed to patients who had not been seen on the date of the entry or patients
who did not even exist. In many instances the log showed that 40 pills had been
dispensed while comparison with the other records showed that the patient had been
prescribed and billed for only 20, leaving the other 20 pills unaccounted for. On every
entry for which the discrepancy could not be explained by a cross-check of the medical
charts or superbills, the person who had initialed it was Beach. Handforth-Kome could
think of no valid explanation for the many discrepancies and concluded that what they
had uncovered was a “flagrant, systematic and extensive falsification of the dispensary
log” and “a serious and significant policy violation” by Beach. Handforth-Kome
testified by affidavit that she was surprised to reach this conclusion, as she had
“previously considered [Beach] an asset to [the clinic].”
              Having confirmed through this review that none of the suspect entries could
be attributed to the clinic’s Director of Clinical Services, Ramona Thompson, Handforth-
Kome called Thompson and asked her to come to the clinic and help with the ongoing
audit. Handforth-Kome also informed Thompson that as Beach’s direct supervisor she

                                            -3-                                        6845

would have to terminate Beach immediately, and that Beach could not be allowed any
more access to the clinic. Thompson accordingly fired Beach when she arrived for work
the next morning, informing her that the reason was her falsification of records. There
is no evidence that Thompson, Handforth-Kome, or any other supervisory employee of
the clinic attempted to elicit Beach’s side of the story before the decision to discharge her
was made and carried out.
              The police conducted their own investigation of the loss of Vicodin and
other drugs from the clinic, and in March 2009 Beach and another former employee of
the clinic were indicted on various counts of misconduct involving controlled substances.
The criminal charges against Beach were dismissed in July 2010. In December 2010 she
brought this suit against Handforth-Kome and the clinic. She admitted in her complaint
that she was an at-will employee but alleged that her discharge had breached the implied
covenant of good faith and fair dealing in two ways: first, because the clinic had failed
to conduct a fair investigation, and second, because it had terminated her in retaliation
for her attempts to improve the clinic’s security procedures.
              The defendants moved for summary judgment on both theories, and the
superior court granted their motion. The court rejected the unfair-investigation theory
on grounds that Beach was an at-will employee who was subject to immediate dismissal
for falsifying records, with no contractual right to an investigation before termination.
It rejected her retaliatory-discharge theory on three independently sufficient grounds:
that her complaints about clinic security were not protected activity, that there was no
evidence her discharge was related to her complaints, and that she could not disprove the
legitimacy of the defendants’ justification for her discharge.

                                            -4-                                        6845

              Beach appeals. She argues that there is a genuine issue of material fact as
to whether her termination was objectively fair, given that the clinic failed to interview
her or relevant doctors and patients or to consider progressive discipline. She also argues
that her complaints about clinic security were protected activity and the superior court
therefore erred in rejecting her retaliatory-discharge claim.
III.	   STANDARD OF REVIEW
              We review a superior court’s grant of summary judgment de novo.1 We
determine whether any genuine issue of material fact exists and whether on the
established facts the moving party is entitled to judgment as a matter of law.2 “We draw
all factual inferences in favor of, and view the facts in the light most favorable to, the
party against whom summary judgment was granted.”3 Contract interpretation is a
question of law reviewed de novo.4
IV.	    DISCUSSION
        A.	   There Was No Genuine Issue Of Material Fact As To Whether The
              Clinic’s Investigation Was Objectively Fair.
              The parties agree that Beach was an at-will employee. Even an at-will
employment contract contains an implied covenant of good faith and fair dealing.5 The
implied covenant has an objective component requiring that the employer act in a manner

        1
            Hoendermis v. Advanced Physical Therapy, Inc., 251 P.3d 346, 351
(Alaska 2011) (citing Nielson v. Benton, 903 P.2d 1049, 1052 (Alaska 1995)).
        2
              Id. (quoting Nielson, 903 P.2d at 1052).
        3
              Id. (citing Rockstad v. Erikson, 113 P.3d 1215, 1219 (Alaska 2005)).
        4
             Rathke v. Corr. Corp. of Am., Inc., 153 P.3d 303, 308 (Alaska 2007) (citing
Smith v. Cleary, 24 P.3d 1245, 1247 (Alaska 2001)).
        5
              Mitford v. de Lasala, 666 P.2d 1000, 1007 (Alaska 1983).
                                          -5-                                        6845
that a reasonable person would regard as fair.6 Beach alleges that the clinic acted
unfairly when it failed to question her or other potential witnesses about the allegations
against her before deciding to terminate her employment.
              The investigation in this case was prompted not because the clinic
suspected wrongdoing on Beach’s part, but because the clinic’s medical director had
received what she considered to be a credible report from a patient that an unnamed
clinic employee was distributing Vicodin illegally. Handforth-Kome repeated the details
of the investigation in both an affidavit and deposition testimony, and her description of
it — summarized above — was not disputed. In short, Handforth-Kome and Dr. Baines
conducted a thorough review of the records relevant to the clinic’s dispensing of
Vicodin, and the review led them to believe that (1) the drug logs had been
systematically falsified, and (2) Beach was responsible for the falsification. When asked
at her deposition, Beach could not think of any evidence she could have given
Handforth-Kome to change her conclusion that the log entries had been falsified; further,
she agreed that the records review was “extremely . . . pointing in [her] direction,” that
it was reasonable for the clinic to conclude that Beach was the one responsible for the
logs’ falsification, and that there was no evidence that, “at that time,” would have pointed
to somebody else as the culprit.
              Beach nonetheless argues that the clinic’s procedure falls short of objective
fairness, pointing to the clinic’s failure “to consult [Beach], to talk to doctors, to speak
with patients, or to put [Beach] on administrative leave or suspension,” particularly
“when coupled with [Beach’s] good record as an employee.” She does not identify any
information that could have been gleaned from interviews and could have changed the

       6
              Smith v. Anchorage Sch. Dist., 240 P.3d 834, 844 (Alaska 2010) (quoting
Mitchell v. Teck Cominco Alaska Inc., 193 P.3d 751, 761 (Alaska 2008)).
                                         -6-                                    6845
clinic’s conclusion. In her deposition she pointed to details in a few entries that she
believes could have directed suspicion away from herself, but she does not appear to
argue that these were sufficient to make the clinic’s original conclusion unreasonable.7
             Beach argues that our case law required at least that she be interviewed
about the alleged wrongdoing before being terminated. In Mitchell v. Teck Cominco
Alaska Inc., on which Beach relies, we held there was a triable issue of fact as to the
fairness of the process when an employer terminated an employee without informing him
of the sexual-harassment charges against him and giving him the opportunity to respond.8
But important to this holding was Teck Cominco’s agreement “that under its policies and
procedures, it was required to investigate the sexual harassment allegations against [the
employee] before firing him” and its further concession at oral argument “that the
implied covenant requires some minimal level of fairness to the employee during an
employer’s investigation.”9 Mitchell holds that if there is a duty to investigate, the
investigation must be fairly carried out.
             In this case, the employee handbook identifies certain types of misconduct
for which the clinic may impose discipline, up to and including “immediate dismissal,”
“without prior warning based on the seriousness of misconduct.”10 In a non-exhaustive

      7
              Beach testified that as a newcomer to the community, she would not have
known some of the names to which prescriptions were falsely attributed. She also
testified that a “scribble through [a] name” on one suspect entry was unlike any
correction she would have made: “If there was a mistake . . ., a line went through it, not
a scribble like that.”
      8
193 P.3d at 761.
      9
             Id.
      10
             We note Beach’s assertion in her reply brief that she was not familiar with
                                                                          (continued...)
                                         -7-                                       6845
list of misconduct warranting immediate dismissal, the employee handbook includes
“willful falsification or misrepresentation on . . . work records” and “unauthorized
alteration of clinic records or other clinic documents.”           Beach conceded the
reasonableness of the clinic’s conclusion that its records had been falsified and that she
was responsible.
             Given the clinic’s reasonable conclusion about what had occurred and who
was responsible, the “immediate dismissal” of Beach “without prior warning” was,
according to the handbook, among its options for disciplining her. Our decision is
therefore controlled not by Mitchell but by Ramsey v. City of Sand Point, in which, as
here, there was no promise of a pre-termination investigation.11 We held in Ramsey that
“[a]s a matter of law, a jury could not find [the employer’s] termination without an
investigation violated [the objective prong of] the implied covenant” where the
employment contract at issue “authorized [the employer] to terminate [the employee] for
any reason whatsoever, so long as it paid him an additional six months’ salary as

      10
               (...continued)
the clinic’s discipline policies. At her deposition, however, she admitted signing an
acknowledgment that stated she had received a copy of the handbook, “read and
understood” it, “agree[d] to comply with all policies[,] and underst[ood] that a breach of
these policies may result in disciplinary action up to and including termination.” The
clinic relied on the handbook and Beach’s written acknowledgment of it in its motion for
summary judgment. In her opposition to the summary judgment motion, Beach made
only a single oblique reference to clinic discipline policies but did not dispute their
existence, claim ignorance of them, or otherwise identify any genuine issues of material
fact that might suggest that the clinic’s reliance on those policies was reasonably
disputed. By raising this argument for the first time on appeal, Beach has waived it. In
re Estate of Blodgett, 147 P.3d 702, 709 n.47 (Alaska 2006) (citing Willoya v. State,
Dep’t of Corr., 53 P.3d 1115, 1120 (Alaska 2002); Brandon v. Corr. Corp. of Am., 28
P.3d 269, 280 (Alaska 2001)).
      11
             936 P.2d 126, 128, 133 (Alaska 1997).
                                        -8-                                         6845
severance pay.”12 We held in Ramsey, as we have held in other cases, that an employer
is not required to provide an employee with procedural protections that conflict with
those to which they have agreed; “[t]he covenant of good faith cannot be interpreted to
prohibit what is expressly permitted by [the parties’] contract.”13      In this case, it is
undisputed that Handforth-Kome and Dr. Baines conducted a methodical review of the
records necessary to allow them to reach a reasonable conclusion about what had
happened and who was responsible for it. Once they had discovered grounds for
Beach’s immediate dismissal as described in the handbook, the implied covenant of good
faith and fair dealing did not require them to give her additional procedural protections.14
         B.	   There Are Sufficient Alternative Bases For Affirming Summary
               Judgment On Beach’s Retaliation Claim.
               A discharge in retaliation for the employee’s legitimate complaints about
job safety and health may give rise to a claim for breach of the implied covenant of good
faith and fair dealing.15 To make out a prima facie case, an employee must show that she
engaged in protected activity, her employer subjected her to an adverse employment

         12
               Id. at 133.
         13
               Id.; see also Era Aviation, Inc. v. Seekins, 973 P.2d 1137, 1141 (Alaska
1999).
         14
             Beach alludes to progressive discipline as an alternative to immediate
discharge but makes no focused argument about it in her opening brief. Any right she
had to progressive discipline is subject to the same analysis as her right to a pre-
termination investigation; that is, the covenant of good faith and fair dealing will not
impose procedural requirements that conflict with what is required by the parties’
agreement. See Hoendermis v. Advanced Physical Therapy, Inc., 251 P.3d 346, 355-56
(Alaska 2011).
         15
            Willard v. Khotol Servs. Corp., 171 P.3d 108, 115 (Alaska 2007) (citing
Reed v. Municipality of Anchorage, 782 P.2d 1155, 1158-59 (Alaska 1989)).
                                        -9-                                   6845
action, and there was a causal link between the protected activity and the adverse
action.16 The burden then shifts to the employer to offer evidence of a legitimate reason
for the adverse action.17 Upon such a showing, the burden shifts back to the employee
to offer evidence that the employer’s explanation is merely a pretext.18
              The superior court rejected Beach’s retaliation theory on three alternative
grounds. It held first that her complaints about security procedures were not protected
activity, and second, even if the complaints were protected, that the evidence showed
they were well received by her employer, “strongly refuting any causal connection
between her proffered protected activity and her termination.”19 The court further held
that even if there were evidence supporting these elements of a prima facie case, the
clinic had proffered a legitimate, non-retaliatory explanation for her discharge — the
falsification of drug records — and, with the burden shifting back to her, Beach had
failed to offer evidence that this explanation was pretextual.
              The only argument Beach makes on appeal regarding her retaliatory
discharge claim is that her complaints about security were protected activity. She does
not address the alternative bases for the superior court’s rejection of the claim. She does
not point to any evidence indicating that her complaints, even if protected, caused her

       16
              See, e.g., Kinzel v. Discovery Drilling, Inc., 93 P.3d 427, 433 (Alaska 2004)
(citing Veco, Inc. v. Rosebrock, 970 P.2d 906, 921 (Alaska 1999)).
       17
              Id.
       18
              Id.
      19
             Indeed, Beach herself stated that her various suggestions for change in
clinic procedures were well received by her supervisors. And when asked at her
deposition whether she had any evidence to support her theory that Handforth-Kome
“sought to scapegoat [Beach] because of [her] criticism of dispensary security,” Beach
conceded that she had none.
                                        -10-                                      6845
termination, nor does she point to evidence showing that the clinic’s explanation was
pretextual. As Beach has waived two independently sufficient bases for the superior
court’s resolution of her retaliatory discharge claim, we do not consider it any further.20
V.     CONCLUSION
              We AFFIRM the superior court’s grant of summary judgment.

       20
            Hitt v. J. B. Coghill, Inc., 641 P.2d 211, 213 n.4 (Alaska 1982) (holding that
arguments not raised in the appellant’s opening brief are waived).