Becker v. Cmty. Health Sys., Inc.

184 Wash.2d 252

359 P.3d 746

Gregg BECKER, Respondent

v.COMMUNITY HEALTH SYSTEMS, INC. d/b/a Community Health Systems Professional Services Corporation d/b/a Community Health Systems PSC, Inc. d/b/a/ Rockwood Clinic P.S.; and Rockwood Clinic, P.S., Petitioners.

No. 90946–6.

Supreme Court of Washington, En Banc.

Argued June 09, 2015.

Decided Sept. 17, 2015.

Mary Elizabeth Schultz, Mary Schultz Law PS, Spangle, WA, for Respondent.

Stellman Keehnel, Katherine Ann Heaton, DLA Piper LLP, Seattle, WA, Keller W. Allen, Mary Margaret Palmer, Law Firm of Keller W. Allen PC, Spokane, WA, for Petitioners.

Jeffrey Lowell Needle, Maynard Building, Lindsay L. Halm, Schroeter Goldmark Bender, Seattle, WA, amicus counsel for Washington Employment Lawyers Association.

Bryan Patrick Harnetiaux, Attorney at Law, Bryan Harnetiaux, WA State Ass'n for Justice Foundation, Spokane, WA, George M. Ahrend, Ahrend Law Firm PLLC, Ephrata, WA, amicus counsel for Washington State Association for Justice Foundation.

Opinion

JOHNSON, J.

¶ 1 This case involves the “jeopardy” element of the tort for wrongful discharge against public policy and whether the Sarbanes–Oxley Act of 2002 (SOX), 18 U.S.C. § 1514A, or the Dodd–Frank Wall Street Reform and Consumer Protection Act (Dodd–Frank), 15 U.S.C. § 78u–6, bar Gregg Becker from recovery under the tort claim. This is one of three concomitant cases before us concerning the “adequacy of alternative remedies” component of the jeopardy element. See Rose v. Anderson Hay & Grain Co., No. 90975–0, 184 Wash.2d 268, 358 P.3d 1139, 2015 WL 5455681 (Wash. Sept. 17, 2015), and Rickman v. Premera Blue Cross, No. 91040–5, 184 Wash.2d 300, 358 P.3d 1153, 2015 WL 5455799 (Wash. Sept. 17, 2015). Our recent holding in Rose instructs that alternative statutory remedies are to be analyzed for exclusivity, rather than adequacy. Under that formulation, neither SOX nor Dodd–Frank preclude Becker from recovery. We affirm the trial court's denial of Community Health Systems Inc.'s (CHS) CR 12(b)(6) motion, and affirm the Court of Appeals in upholding that decision upon certified interlocutory review.

Facts

¶ 2 Becker began working for Rockwood Clinic PS, an acquired subsidiary of CHS,¹ as its chief financial officer (CFO) in February 2011. As a publicly traded company, CHS is required to file reports with the United States Securities and Exchange Commission (SEC). These reports are available publicly for the purpose of accurately advising the SEC, and CHS' creditors and investors, of CHS' profitability and business strategies. As Rockwood's CFO, Becker was required by state and federal law to ensure that Rockwood's reports did not mislead the public, which also required his personal verification that the reports did not contain any inaccurate material facts or material omissions. As the CFO, Becker himself was potentially criminally liable for misleading reporting. In October 2011, Becker submitted to CHS' financial department an “EBIDTA,” a calculation of earnings before interest, taxes, depreciation, and amortization—it serves as an important measure of financial health for publically traded companies. Becker's EBIDTA report projected a $12 million operating loss for Rockwood the upcoming year.

¶ 3 Unbeknownst to Becker, when CHS acquired Rockwood it represented to creditors that the Rockwood acquisition would incur only a $4 million operating loss. To cover the discrepancy, CHS' financial supervisors allegedly directed Becker to correct his EBIDTA to reflect the targeted $4 million loss. CHS did not provide a basis for its low calculation. Becker refused, fearing that the projection would mislead creditors and investors in violation of SOX.

¶ 4 Soon after, Rockwood's chief executive officer (CEO) initiated an unscheduled evaluation of Becker's performance in which the CEO marked him with an unacceptable performance rating and placed him on a performance improvement plan. As part of his improvement plan, Becker was directed to edit the EBIDTA projected loss to reflect the $4 million valuation. The CEO made clear that Becker's refusal to do so put his position in jeopardy.

¶ 5 Becker sought legal counsel and decided to report his concerns upward: he wrote to CHS' and Rockwood's CEOs, explaining his concern that CHS was attempting to misrepresent its projected budget in violation of financial reporting laws. He wrote that he felt compelled to resign unless CHS responded to his concerns. The next day, CHS and Rockwood accepted Becker's resignation.

¶ 6 Becker filed two claims in Spokane County Superior Court: one for wrongful discharge in violation of public policy and the other for a violation of SOX.² CHS successfully removed the case to federal court, prompting Becker to amend his complaint and omit his federal SOX claim. The federal court remanded the case back to the state superior court. Becker's amended complaint alleged wrongful discharge for Becker's refusal to violate financial reporting laws, which resulted in economic and emotional distress damages.

¶ 7 CHS filed a CR 12(b)(6) motion to dismiss the complaint for failure to state a claim, contending that the jeopardy element of the tort had not been met because there were adequate alternative means to protect the public policy of honesty in corporate financial reporting. The trial court denied the motion, and CHS successfully moved to have the question certified for interlocutory review under RAP 2.3(b)(4). The Court of Appeals accepted review and determined that the jeopardy element had been satisfied because the alternative administrative enforcement mechanisms of SOX and Dodd–Frank were inadequate and therefore did not foreclose the common law tort remedies for employees. Becker v. Cmty. Health Sys., Inc., 182 Wash.App. 935, 332 P.3d 1085 (2014), review granted, 182 Wash.2d 1009, 343 P.3d 759 (2015).

Analysis

¶ 8 We review the trial court's ruling on a motion to dismiss de novo. Factual allegations are accepted as true, and unless it appears beyond doubt that the plaintiff can prove no set of facts consistent with the complaint that would entitle him or her to relief, the motion to dismiss must be denied. Corrigal v. Ball & Dodd Funeral Home, Inc., 89 Wash.2d 959, 961, 577 P.2d 580 (1978).

¶ 9 We accepted review of these three cases—Becker, Rose , and Rickman —to determine whether other nonexclusive administrative remedies nevertheless preempt the tort for wrongful discharge when those statutes are “adequate” to promote the public policy. In our decision in Rose, we determined that the “adequacy of alternative remedies” analysis misapprehends the role of the common law and the underlying purpose of the tort. When other statutory remedies provide alternative remedies to protect the public policy, we concluded that exclusivity, not adequacy, is the key inquiry. Applied to these facts, we agree with the Court of Appeals that Becker's claim properly survives CHS' CR 12(b)(6) motion to dismiss.

¶ 10 The tort for wrongful discharge in violation of public policy is a narrow exception to the at-will doctrine. It is recognized as a means of encouraging employees to follow the law and preventing employers from using the at-will doctrine to subvert those efforts to promote public policy. To state a cause of action, the plaintiff must plead and prove that his or her termination was motivated by reasons that contravene an important mandate of public policy. We maintain a strict clarity requirement in which the plaintiff must establish that the public policy is clearly legislatively or judicially recognized. Once established, the burden shifts to the employer to plead and prove that the employee's termination was motivated by other, legitimate, reasons. Thompson v. St. Regis Paper Co., 102 Wash.2d 219, 232–33, 685 P.2d 1081 (1984).

¶ 11 Because we construe this tort exception narrowly, wrongful discharge claims have generally been limited to four scenarios:

(1) where employees are fired for refusing to commit an illegal act; (2) where employees are fired for performing a public duty or obligation, such as serving jury duty; (3) where employees are fired for exercising a legal right or privilege, such as filing workers' compensation claims; and (4) where employees are fired in retaliation for reporting employer misconduct, i.e., whistle blowing.

Gardner v. Loomis Armored, Inc., 128 Wash.2d 931, 936, 913 P.2d 377 (1996) (citing Dicomes v. State, 113 Wash.2d 612, 618, 782 P.2d 1002 (1989) ). When the plaintiff's case does not fit neatly within one of these scenarios, a more refined analysis may be necessary, and the four-factor Perritt analysis may provide helpful guidance. Gardner, 128 Wash.2d at 941, 913 P.2d 377 (citing Henry H. Perritt, Jr., Workplace Torts: Rights and Liabilities § 3.7 (1991)).³

¶ 12 But such detailed analysis is unnecessary here. Becker's complaint alleges that he was terminated for refusing to criminally misrepresent the EBIDTA report of Rockwood's operating losses. His case falls squarely within the first scenario—termination for refusal to commit an illegal act. Taking his allegations as true, as we must when reviewing a motion to dismiss, Becker has pleaded sufficient facts to establish a claim that his discharge was in violation of clear, important public policy.

¶ 13 As to the potential exclusionary effects of alternative statutes, we review these statutes for exclusivity, not adequacy. For the same reasons discussed in Rose, we reject the argument that the adequacy of alternative remedies approach plays any legitimate role in our analysis. If SOX and Dodd–Frank already protect whistle-blowers from termination, then the availability of this alternative method of recovery does not impact the employer's discretion to terminate employees without cause. The elimination of this adequacy requirement has no effect on the breadth of the at-will doctrine; rather, its removal from our analysis merely eliminates a loophole for employers who intentionally contravene public...